Correlation Between Repligen and Waters

Can any of the company-specific risk be diversified away by investing in both Repligen and Waters at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Repligen and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Repligen and Waters, you can compare the effects of market volatilities on Repligen and Waters and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Repligen with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repligen and Waters.

Diversification Opportunities for Repligen and Waters

0.75

Correlation Coefficient

Repligen  Waters

Poor diversification

The 3 months correlation between Repligen and Waters is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Repligen and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Repligen is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Repligen are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Repligen i.e., Repligen and Waters go up and down completely randomly.

Pair Corralation between Repligen and Waters

Given the investment horizon of 90 days Repligen is expected to under-perform the Waters. In addition to that, Repligen is 1.72 times more volatile than Waters. It trades about -0.02 of its total potential returns per unit of risk. Waters is currently generating about -0.01 per unit of volatility. If you would invest  37,094  in Waters on December 28, 2024 and sell it today you would lose (878.00) from holding Waters or give up 2.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Repligen  vs.  Waters

Repligen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Repligen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Repligen is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Waters

Risk-Adjusted Performance

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Repligen and Waters

The main advantage of trading using opposite Repligen and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repligen position performs unexpectedly, Waters can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Waters will offset losses from the drop in Waters' long position.

The idea behind Repligen and Waters pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.