Correlation Between CVD Equipment and Xylem
Can any of the company-specific risk be diversified away by investing in both CVD Equipment and Xylem 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 CVD Equipment and Xylem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVD Equipment and Xylem Inc, you can compare the effects of market volatilities on CVD Equipment and Xylem 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 CVD Equipment with a short position of Xylem. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVD Equipment and Xylem.
Diversification Opportunities for CVD Equipment and Xylem
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVD and Xylem is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CVD Equipment and Xylem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xylem Inc and CVD Equipment 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 CVD Equipment are associated (or correlated) with Xylem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xylem Inc has no effect on the direction of CVD Equipment i.e., CVD Equipment and Xylem go up and down completely randomly.
Pair Corralation between CVD Equipment and Xylem
Considering the 90-day investment horizon CVD Equipment is expected to under-perform the Xylem. In addition to that, CVD Equipment is 3.33 times more volatile than Xylem Inc. It trades about -0.05 of its total potential returns per unit of risk. Xylem Inc is currently generating about 0.04 per unit of volatility. If you would invest 10,188 in Xylem Inc on August 27, 2024 and sell it today you would earn a total of 2,499 from holding Xylem Inc or generate 24.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVD Equipment vs. Xylem Inc
Performance |
| Timeline |
| CVD Equipment |
| Xylem Inc |
CVD Equipment and Xylem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVD Equipment and Xylem
The main advantage of trading using opposite CVD Equipment and Xylem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVD Equipment position performs unexpectedly, Xylem 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 Xylem will offset losses from the drop in Xylem's long position.The idea behind CVD Equipment and Xylem Inc 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.| Xylem vs. Aquagold International | Xylem vs. Morningstar Unconstrained Allocation | Xylem vs. High Yield Municipal Fund | Xylem vs. Thrivent High Yield |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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