Correlation Between Waters and Pinterest

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

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

Diversification Opportunities for Waters and Pinterest

-0.21

Correlation Coefficient

Waters  Pinterest

Very good diversification

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

Pair Corralation between Waters and Pinterest

Considering the 90-day investment horizon Waters is expected to generate 0.69 times more return on investment than Pinterest. However, Waters is 1.45 times less risky than Pinterest. It trades about 0.33 of its potential returns per unit of risk. Pinterest is currently generating about 0.1 per unit of risk. If you would invest  36,976  in Waters on October 23, 2024 and sell it today you would earn a total of  3,424  from holding Waters or generate 9.26% return on investment over 90 days.

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

Waters  vs.  Pinterest

Waters

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 9 (%) 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.

Pinterest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinterest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Pinterest is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Waters and Pinterest

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

The idea behind Waters and Pinterest 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.