Correlation Between Waters and Charles River

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

By analyzing existing cross correlation between Waters and Charles River Laboratories, you can compare the effects of market volatilities on Waters and Charles River 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 Charles River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Charles River.

Diversification Opportunities for Waters and Charles River

-0.42

Correlation Coefficient

Waters  Charles River

Very good diversification

The 3 months correlation between Waters and Charles is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Charles River Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles River Labora 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 Charles River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles River Labora has no effect on the direction of Waters i.e., Waters and Charles River go up and down completely randomly.

Pair Corralation between Waters and Charles River

Considering the 90-day investment horizon Waters is expected to generate 0.74 times more return on investment than Charles River. However, Waters is 1.34 times less risky than Charles River. It trades about 0.0 of its potential returns per unit of risk. Charles River Laboratories is currently generating about -0.11 per unit of risk. If you would invest  38,472  in Waters on November 28, 2024 and sell it today you would lose (389.00) from holding Waters or give up 1.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Waters  vs.  Charles River Laboratories

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.

Charles River Labora

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Waters and Charles River

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

The idea behind Waters and Charles River Laboratories 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.