Correlation Between Arcadium Lithium and Waters
Can any of the company-specific risk be diversified away by investing in both Arcadium Lithium 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 Arcadium Lithium and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arcadium Lithium plc and Waters, you can compare the effects of market volatilities on Arcadium Lithium 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 Arcadium Lithium with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcadium Lithium and Waters.
Diversification Opportunities for Arcadium Lithium and Waters
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Arcadium and Waters is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Arcadium Lithium plc and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Arcadium Lithium 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 Arcadium Lithium plc 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 Arcadium Lithium i.e., Arcadium Lithium and Waters go up and down completely randomly.
Pair Corralation between Arcadium Lithium and Waters
Given the investment horizon of 90 days Arcadium Lithium plc is expected to under-perform the Waters. In addition to that, Arcadium Lithium is 2.03 times more volatile than Waters. It trades about -0.01 of its total potential returns per unit of risk. Waters is currently generating about 0.02 per unit of volatility. If you would invest 34,397 in Waters on September 4, 2024 and sell it today you would earn a total of 4,313 from holding Waters or generate 12.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arcadium Lithium plc vs. Waters
Performance |
| Timeline |
| Arcadium Lithium plc |
| Waters |
Arcadium Lithium and Waters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arcadium Lithium and Waters
The main advantage of trading using opposite Arcadium Lithium and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcadium Lithium 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.| Arcadium Lithium vs. Teleflex Incorporated | Arcadium Lithium vs. Saia Inc | Arcadium Lithium vs. Ameriprise Financial | Arcadium Lithium vs. Mesa Air Group |
| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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