Correlation Between Waters and Histogen

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

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

Diversification Opportunities for Waters and Histogen

-0.21

Correlation Coefficient

Waters  Histogen

Very good diversification

The 3 months correlation between Waters and Histogen is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Histogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histogen 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 Histogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histogen has no effect on the direction of Waters i.e., Waters and Histogen go up and down completely randomly.

Pair Corralation between Waters and Histogen

Considering the 90-day investment horizon Waters is expected to generate 18.43 times less return on investment than Histogen. But when comparing it to its historical volatility, Waters is 2.31 times less risky than Histogen. It trades about 0.01 of its potential returns per unit of risk. Histogen is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.60  in Histogen on December 29, 2024 and sell it today you would earn a total of  0.10  from holding Histogen or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	32.79%
Values	Daily Returns

Waters  vs.  Histogen

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.

Histogen

Risk-Adjusted Performance

Modest

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

Pair Trading with Waters and Histogen

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

The idea behind Waters and Histogen 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.