Correlation Between Waters and Birkenstock Holding

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

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

Diversification Opportunities for Waters and Birkenstock Holding

0.66

Correlation Coefficient

Waters  Birkenstock Holding

Poor diversification

The 3 months correlation between Waters and Birkenstock is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Birkenstock Holding plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birkenstock Holding plc and Waters 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 Waters are associated (or correlated) with Birkenstock Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birkenstock Holding plc has no effect on the direction of Waters i.e., Waters and Birkenstock Holding go up and down completely randomly.

Pair Corralation between Waters and Birkenstock Holding

Considering the 90-day investment horizon Waters is expected to generate 0.76 times more return on investment than Birkenstock Holding. However, Waters is 1.32 times less risky than Birkenstock Holding. It trades about -0.01 of its potential returns per unit of risk. Birkenstock Holding plc is currently generating about -0.14 per unit of risk. If you would invest  37,094  in Waters on December 30, 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

Waters  vs.  Birkenstock Holding plc

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.

Birkenstock Holding plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birkenstock Holding plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Waters and Birkenstock Holding

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

The idea behind Waters and Birkenstock Holding plc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..