Correlation Between Zurn Elkay and CO2 Solutions

Can any of the company-specific risk be diversified away by investing in both Zurn Elkay and CO2 Solutions 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 Zurn Elkay and CO2 Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zurn Elkay Water and CO2 Solutions, you can compare the effects of market volatilities on Zurn Elkay and CO2 Solutions 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 Zurn Elkay with a short position of CO2 Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurn Elkay and CO2 Solutions.

Diversification Opportunities for Zurn Elkay and CO2 Solutions

0.0

Correlation Coefficient

Zurn Elkay  CO2 Solutions

Pay attention - limited upside

The 3 months correlation between Zurn and CO2 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Zurn Elkay Water and CO2 Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CO2 Solutions and Zurn Elkay 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 Zurn Elkay Water are associated (or correlated) with CO2 Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CO2 Solutions has no effect on the direction of Zurn Elkay i.e., Zurn Elkay and CO2 Solutions go up and down completely randomly.

Pair Corralation between Zurn Elkay and CO2 Solutions

Considering the 90-day investment horizon Zurn Elkay Water is expected to generate 0.4 times more return on investment than CO2 Solutions. However, Zurn Elkay Water is 2.5 times less risky than CO2 Solutions. It trades about 0.07 of its potential returns per unit of risk. CO2 Solutions is currently generating about -0.04 per unit of risk. If you would invest  2,407  in Zurn Elkay Water on August 31, 2024 and sell it today you would earn a total of  1,561  from holding Zurn Elkay Water or generate 64.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Zurn Elkay Water  vs.  CO2 Solutions

Zurn Elkay Water

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zurn Elkay Water are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Zurn Elkay unveiled solid returns over the last few months and may actually be approaching a breakup point.

CO2 Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CO2 Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, CO2 Solutions is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zurn Elkay and CO2 Solutions

The main advantage of trading using opposite Zurn Elkay and CO2 Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurn Elkay position performs unexpectedly, CO2 Solutions 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 CO2 Solutions will offset losses from the drop in CO2 Solutions' long position.

The idea behind Zurn Elkay Water and CO2 Solutions 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.