Correlation Between Thermo Fisher and Waters

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

By analyzing existing cross correlation between Thermo Fisher Scientific and Waters, you can compare the effects of market volatilities on Thermo Fisher 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 Thermo Fisher with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thermo Fisher and Waters.

Diversification Opportunities for Thermo Fisher and Waters

0.89

Correlation Coefficient

Thermo Fisher  Waters

Very poor diversification

The 3 months correlation between Thermo and Waters is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Thermo Fisher Scientific and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Thermo Fisher 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 Thermo Fisher Scientific 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 Thermo Fisher i.e., Thermo Fisher and Waters go up and down completely randomly.

Pair Corralation between Thermo Fisher and Waters

Considering the 90-day investment horizon Thermo Fisher is expected to generate 1.55 times less return on investment than Waters. But when comparing it to its historical volatility, Thermo Fisher Scientific is 1.16 times less risky than Waters. It trades about 0.06 of its potential returns per unit of risk. Waters is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  34,471  in Waters on November 19, 2024 and sell it today you would earn a total of  2,502  from holding Waters or generate 7.26% return on investment over 90 days.

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

Thermo Fisher Scientific  vs.  Waters

Thermo Fisher Scientific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thermo Fisher Scientific are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Thermo Fisher 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Thermo Fisher and Waters

The main advantage of trading using opposite Thermo Fisher and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermo Fisher 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 Thermo Fisher Scientific 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.