Correlation Between Waters and T2 Biosystms

Can any of the company-specific risk be diversified away by investing in both Waters and T2 Biosystms 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 T2 Biosystms into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waters and T2 Biosystms, you can compare the effects of market volatilities on Waters and T2 Biosystms 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 T2 Biosystms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and T2 Biosystms.

Diversification Opportunities for Waters and T2 Biosystms

-0.07

Correlation Coefficient

Waters  T2 Biosystms

Good diversification

The 3 months correlation between Waters and TTOO is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Waters and T2 Biosystms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T2 Biosystms 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 T2 Biosystms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T2 Biosystms has no effect on the direction of Waters i.e., Waters and T2 Biosystms go up and down completely randomly.

Pair Corralation between Waters and T2 Biosystms

Considering the 90-day investment horizon Waters is expected to generate 14.71 times less return on investment than T2 Biosystms. But when comparing it to its historical volatility, Waters is 13.17 times less risky than T2 Biosystms. It trades about 0.02 of its potential returns per unit of risk. T2 Biosystms is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  34.00  in T2 Biosystms on December 17, 2024 and sell it today you would lose (16.00) from holding T2 Biosystms or give up 47.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Waters  vs.  T2 Biosystms

Waters

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

T2 Biosystms

Risk-Adjusted Performance

Weak

Over the last 90 days T2 Biosystms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, T2 Biosystms displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waters and T2 Biosystms

The main advantage of trading using opposite Waters and T2 Biosystms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, T2 Biosystms 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 T2 Biosystms will offset losses from the drop in T2 Biosystms' long position.

The idea behind Waters and T2 Biosystms 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.