Correlation Between T2 Biosystms and Waters

Can any of the company-specific risk be diversified away by investing in both T2 Biosystms 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 T2 Biosystms and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T2 Biosystms and Waters, you can compare the effects of market volatilities on T2 Biosystms 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 T2 Biosystms with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of T2 Biosystms and Waters.

Diversification Opportunities for T2 Biosystms and Waters

-0.07

Correlation Coefficient

T2 Biosystms  Waters

Good diversification

The 3 months correlation between TTOO and Waters is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding T2 Biosystms and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and T2 Biosystms 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 T2 Biosystms 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 T2 Biosystms i.e., T2 Biosystms and Waters go up and down completely randomly.

Pair Corralation between T2 Biosystms and Waters

Given the investment horizon of 90 days T2 Biosystms is expected to generate 13.17 times more return on investment than Waters. However, T2 Biosystms is 13.17 times more volatile than Waters. It trades about 0.02 of its potential returns per unit of risk. Waters is currently generating about 0.02 per unit of risk. If you would invest  34.00  in T2 Biosystms on December 17, 2024 and sell it today you would lose (16.00) from holding T2 Biosystms or give up 47.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

T2 Biosystms  vs.  Waters

T2 Biosystms

Risk-Adjusted Performance

Weak

Over the last 90 days T2 Biosystms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, T2 Biosystms displayed solid returns over the last few months and may actually be approaching a breakup point.

Waters

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 T2 Biosystms and Waters

The main advantage of trading using opposite T2 Biosystms and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T2 Biosystms 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 T2 Biosystms 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.