Correlation Between Waters and Generation Bio

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

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

Diversification Opportunities for Waters and Generation Bio

-0.48

Correlation Coefficient

Waters  Generation Bio

Very good diversification

The 3 months correlation between Waters and Generation is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Generation Bio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Bio 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 Generation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Bio has no effect on the direction of Waters i.e., Waters and Generation Bio go up and down completely randomly.

Pair Corralation between Waters and Generation Bio

Considering the 90-day investment horizon Waters is expected to generate 0.57 times more return on investment than Generation Bio. However, Waters is 1.76 times less risky than Generation Bio. It trades about 0.08 of its potential returns per unit of risk. Generation Bio Co is currently generating about -0.12 per unit of risk. If you would invest  33,975  in Waters on September 3, 2024 and sell it today you would earn a total of  4,497  from holding Waters or generate 13.24% return on investment over 90 days.

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

Waters  vs.  Generation Bio Co

Waters

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Generation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Bio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Waters and Generation Bio

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

The idea behind Waters and Generation Bio Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.