Correlation Between Waters and Lonza Group

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

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

Diversification Opportunities for Waters and Lonza Group

0.57

Correlation Coefficient

Waters  Lonza Group

Very weak diversification

The 3 months correlation between Waters and Lonza is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Lonza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group 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 Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group has no effect on the direction of Waters i.e., Waters and Lonza Group go up and down completely randomly.

Pair Corralation between Waters and Lonza Group

Considering the 90-day investment horizon Waters is expected to generate 1.77 times less return on investment than Lonza Group. But when comparing it to its historical volatility, Waters is 1.48 times less risky than Lonza Group. It trades about 0.06 of its potential returns per unit of risk. Lonza Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  58,438  in Lonza Group on December 19, 2024 and sell it today you would earn a total of  6,087  from holding Lonza Group or generate 10.42% return on investment over 90 days.

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

Waters  vs.  Lonza Group

Waters

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lonza Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Lonza Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waters and Lonza Group

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

The idea behind Waters and Lonza Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.