Correlation Between Federal Signal and Evoqua Water
Can any of the company-specific risk be diversified away by investing in both Federal Signal and Evoqua Water 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 Federal Signal and Evoqua Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and Evoqua Water Technologies, you can compare the effects of market volatilities on Federal Signal and Evoqua Water 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 Federal Signal with a short position of Evoqua Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Evoqua Water.
Diversification Opportunities for Federal Signal and Evoqua Water
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federal and Evoqua is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Evoqua Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoqua Water Technologies and Federal Signal 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 Federal Signal are associated (or correlated) with Evoqua Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evoqua Water Technologies has no effect on the direction of Federal Signal i.e., Federal Signal and Evoqua Water go up and down completely randomly.
Pair Corralation between Federal Signal and Evoqua Water
If you would invest 8,442 in Federal Signal on August 30, 2024 and sell it today you would earn a total of 1,346 from holding Federal Signal or generate 15.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.35% |
| Values | Daily Returns |
Federal Signal vs. Evoqua Water Technologies
Performance |
| Timeline |
| Federal Signal |
| Evoqua Water Technologies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Federal Signal and Evoqua Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Signal and Evoqua Water
The main advantage of trading using opposite Federal Signal and Evoqua Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, Evoqua Water 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 Evoqua Water will offset losses from the drop in Evoqua Water's long position.| Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
| Evoqua Water vs. Federal Signal | Evoqua Water vs. Energy Recovery | Evoqua Water vs. CECO Environmental Corp | Evoqua Water vs. 374Water Common Stock |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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