Correlation Between Textainer Group and Water Ways

Can any of the company-specific risk be diversified away by investing in both Textainer Group and Water Ways 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 Textainer Group and Water Ways into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Textainer Group Holdings and Water Ways Technologies, you can compare the effects of market volatilities on Textainer Group and Water Ways 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 Textainer Group with a short position of Water Ways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textainer Group and Water Ways.

Diversification Opportunities for Textainer Group and Water Ways

0.03

Correlation Coefficient

Textainer Group  Water Ways

Significant diversification

The 3 months correlation between Textainer and Water is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Textainer Group Holdings and Water Ways Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Water Ways Technologies and Textainer Group 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 Textainer Group Holdings are associated (or correlated) with Water Ways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Water Ways Technologies has no effect on the direction of Textainer Group i.e., Textainer Group and Water Ways go up and down completely randomly.

Pair Corralation between Textainer Group and Water Ways

Assuming the 90 days horizon Textainer Group is expected to generate 188.59 times less return on investment than Water Ways. But when comparing it to its historical volatility, Textainer Group Holdings is 31.7 times less risky than Water Ways. It trades about 0.02 of its potential returns per unit of risk. Water Ways Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Water Ways Technologies on December 30, 2024 and sell it today you would lose (0.86) from holding Water Ways Technologies or give up 86.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Textainer Group Holdings  vs.  Water Ways Technologies

Textainer Group Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Textainer Group Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Textainer Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Water Ways Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Water Ways Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Water Ways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Textainer Group and Water Ways

The main advantage of trading using opposite Textainer Group and Water Ways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textainer Group position performs unexpectedly, Water Ways 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 Water Ways will offset losses from the drop in Water Ways' long position.

The idea behind Textainer Group Holdings and Water Ways Technologies 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.