Correlation Between Waters and MDxHealth

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

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

Diversification Opportunities for Waters and MDxHealth

-0.54

Correlation Coefficient

Waters  MDxHealth

Excellent diversification

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

Pair Corralation between Waters and MDxHealth

Considering the 90-day investment horizon Waters is expected to generate 0.76 times more return on investment than MDxHealth. However, Waters is 1.31 times less risky than MDxHealth. It trades about 0.08 of its potential returns per unit of risk. MDxHealth SA ADR is currently generating about -0.14 per unit of risk. If you would invest  33,975  in Waters on August 31, 2024 and sell it today you would earn a total of  4,682  from holding Waters or generate 13.78% 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.  MDxHealth SA ADR

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.

MDxHealth SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MDxHealth SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Waters and MDxHealth

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

The idea behind Waters and MDxHealth SA ADR 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.