Correlation Between Waters and 50247VAC3

Can any of the company-specific risk be diversified away by investing in both Waters and 50247VAC3 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 50247VAC3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waters and LYB INTL FIN, you can compare the effects of market volatilities on Waters and 50247VAC3 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 50247VAC3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and 50247VAC3.

Diversification Opportunities for Waters and 50247VAC3

-0.28

Correlation Coefficient

Waters  50247VAC3

Very good diversification

The 3 months correlation between Waters and 50247VAC3 is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Waters and LYB INTL FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYB INTL FIN 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 50247VAC3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYB INTL FIN has no effect on the direction of Waters i.e., Waters and 50247VAC3 go up and down completely randomly.

Pair Corralation between Waters and 50247VAC3

Considering the 90-day investment horizon Waters is expected to under-perform the 50247VAC3. But the stock apears to be less risky and, when comparing its historical volatility, Waters is 1.04 times less risky than 50247VAC3. The stock trades about -0.16 of its potential returns per unit of risk. The LYB INTL FIN is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,945  in LYB INTL FIN on October 9, 2024 and sell it today you would lose (27.00) from holding LYB INTL FIN or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Waters  vs.  LYB INTL FIN

Waters

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 3 (%) 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 February 2025.

LYB INTL FIN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB INTL FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 50247VAC3 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Waters and 50247VAC3

The main advantage of trading using opposite Waters and 50247VAC3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, 50247VAC3 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 50247VAC3 will offset losses from the drop in 50247VAC3's long position.

The idea behind Waters and LYB INTL FIN 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.