Correlation Between Waterdrop ADR and Fundamental Global

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

By analyzing existing cross correlation between Waterdrop ADR and Fundamental Global, you can compare the effects of market volatilities on Waterdrop ADR and Fundamental Global 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 Waterdrop ADR with a short position of Fundamental Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waterdrop ADR and Fundamental Global.

Diversification Opportunities for Waterdrop ADR and Fundamental Global

-0.41

Correlation Coefficient

Waterdrop ADR  Fundamental Global

Very good diversification

The 3 months correlation between Waterdrop and Fundamental is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Waterdrop ADR and Fundamental Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Global and Waterdrop ADR 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 Waterdrop ADR are associated (or correlated) with Fundamental Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Global has no effect on the direction of Waterdrop ADR i.e., Waterdrop ADR and Fundamental Global go up and down completely randomly.

Pair Corralation between Waterdrop ADR and Fundamental Global

Considering the 90-day investment horizon Waterdrop ADR is expected to generate 0.5 times more return on investment than Fundamental Global. However, Waterdrop ADR is 1.99 times less risky than Fundamental Global. It trades about 0.07 of its potential returns per unit of risk. Fundamental Global is currently generating about -0.13 per unit of risk. If you would invest  113.00  in Waterdrop ADR on November 28, 2024 and sell it today you would earn a total of  13.00  from holding Waterdrop ADR or generate 11.5% return on investment over 90 days.

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

Waterdrop ADR  vs.  Fundamental Global

Waterdrop ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waterdrop ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental indicators, Waterdrop ADR demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Fundamental Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Global 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Waterdrop ADR and Fundamental Global

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

The idea behind Waterdrop ADR and Fundamental Global 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.