Correlation Between Waters and Lineage Cell

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

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

Diversification Opportunities for Waters and Lineage Cell

0.54

Correlation Coefficient

Waters  Lineage Cell

Very weak diversification

The 3 months correlation between Waters and Lineage is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell Therapeutics 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 Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of Waters i.e., Waters and Lineage Cell go up and down completely randomly.

Pair Corralation between Waters and Lineage Cell

Considering the 90-day investment horizon Waters is expected to generate 6.9 times less return on investment than Lineage Cell. But when comparing it to its historical volatility, Waters is 2.92 times less risky than Lineage Cell. It trades about 0.01 of its potential returns per unit of risk. Lineage Cell Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Lineage Cell Therapeutics on December 29, 2024 and sell it today you would lose (1.00) from holding Lineage Cell Therapeutics or give up 2.0% of portfolio value over 90 days.

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

Waters  vs.  Lineage Cell Therapeutics

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.

Lineage Cell Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lineage Cell Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lineage Cell may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Waters and Lineage Cell

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

The idea behind Waters and Lineage Cell Therapeutics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.