Correlation Between Waters and Inovio Pharmaceuticals

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

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

Diversification Opportunities for Waters and Inovio Pharmaceuticals

0.4

Correlation Coefficient

Waters  Inovio Pharmaceuticals

Very weak diversification

The 3 months correlation between Waters and Inovio is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Inovio Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inovio Pharmaceuticals 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 Inovio Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inovio Pharmaceuticals has no effect on the direction of Waters i.e., Waters and Inovio Pharmaceuticals go up and down completely randomly.

Pair Corralation between Waters and Inovio Pharmaceuticals

Considering the 90-day investment horizon Waters is expected to under-perform the Inovio Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Waters is 2.6 times less risky than Inovio Pharmaceuticals. The stock trades about 0.0 of its potential returns per unit of risk. The Inovio Pharmaceuticals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Inovio Pharmaceuticals on December 28, 2024 and sell it today you would lose (2.00) from holding Inovio Pharmaceuticals or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Waters  vs.  Inovio Pharmaceuticals

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.

Inovio Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inovio Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Inovio Pharmaceuticals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Waters and Inovio Pharmaceuticals

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

The idea behind Waters and Inovio Pharmaceuticals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.