Correlation Between Allient and Waters
Can any of the company-specific risk be diversified away by investing in both Allient and Waters 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 Allient and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allient and Waters, you can compare the effects of market volatilities on Allient and Waters 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 Allient with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allient and Waters.
Diversification Opportunities for Allient and Waters
Poor diversification
The 3 months correlation between Allient and Waters is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Allient and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Allient 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 Allient are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Allient i.e., Allient and Waters go up and down completely randomly.
Pair Corralation between Allient and Waters
Given the investment horizon of 90 days Allient is expected to under-perform the Waters. In addition to that, Allient is 1.41 times more volatile than Waters. It trades about -0.02 of its total potential returns per unit of risk. Waters is currently generating about 0.05 per unit of volatility. If you would invest 27,977 in Waters on September 12, 2024 and sell it today you would earn a total of 11,058 from holding Waters or generate 39.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allient vs. Waters
Performance |
| Timeline |
| Allient |
| Waters |
Allient and Waters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allient and Waters
The main advantage of trading using opposite Allient and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allient position performs unexpectedly, Waters 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 Waters will offset losses from the drop in Waters' long position.The idea behind Allient and Waters 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.| Waters vs. IDEXX Laboratories | Waters vs. IQVIA Holdings | Waters vs. Charles River Laboratories | Waters vs. Revvity |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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