Correlation Between Federal Signal and 374Water Common
Can any of the company-specific risk be diversified away by investing in both Federal Signal and 374Water Common 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 374Water Common into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and 374Water Common Stock, you can compare the effects of market volatilities on Federal Signal and 374Water Common 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 374Water Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and 374Water Common.
Diversification Opportunities for Federal Signal and 374Water Common
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and 374Water is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and 374Water Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 374Water Common Stock 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 374Water Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 374Water Common Stock has no effect on the direction of Federal Signal i.e., Federal Signal and 374Water Common go up and down completely randomly.
Pair Corralation between Federal Signal and 374Water Common
Considering the 90-day investment horizon Federal Signal is expected to generate 0.33 times more return on investment than 374Water Common. However, Federal Signal is 3.04 times less risky than 374Water Common. It trades about 0.08 of its potential returns per unit of risk. 374Water Common Stock is currently generating about 0.02 per unit of risk. If you would invest 6,968 in Federal Signal on August 27, 2024 and sell it today you would earn a total of 2,619 from holding Federal Signal or generate 37.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Signal vs. 374Water Common Stock
Performance |
| Timeline |
| Federal Signal |
| 374Water Common Stock |
Federal Signal and 374Water Common Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Signal and 374Water Common
The main advantage of trading using opposite Federal Signal and 374Water Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, 374Water Common 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 374Water Common will offset losses from the drop in 374Water Common'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 |
| 374Water Common vs. Zurn Elkay Water | 374Water Common vs. Energy Recovery | 374Water Common vs. CECO Environmental Corp | 374Water Common vs. Federal Signal |
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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