Correlation Between Federal Signal and Zurn Elkay
Can any of the company-specific risk be diversified away by investing in both Federal Signal and Zurn Elkay 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 Zurn Elkay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Signal and Zurn Elkay Water, you can compare the effects of market volatilities on Federal Signal and Zurn Elkay 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 Zurn Elkay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Zurn Elkay.
Diversification Opportunities for Federal Signal and Zurn Elkay
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Federal and Zurn is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Zurn Elkay Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurn Elkay Water 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 Zurn Elkay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurn Elkay Water has no effect on the direction of Federal Signal i.e., Federal Signal and Zurn Elkay go up and down completely randomly.
Pair Corralation between Federal Signal and Zurn Elkay
Considering the 90-day investment horizon Federal Signal is expected to generate 0.99 times more return on investment than Zurn Elkay. However, Federal Signal is 1.01 times less risky than Zurn Elkay. It trades about 0.09 of its potential returns per unit of risk. Zurn Elkay Water is currently generating about 0.07 per unit of risk. If you would invest 4,621 in Federal Signal on August 27, 2024 and sell it today you would earn a total of 4,966 from holding Federal Signal or generate 107.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Signal vs. Zurn Elkay Water
Performance |
| Timeline |
| Federal Signal |
| Zurn Elkay Water |
Federal Signal and Zurn Elkay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Signal and Zurn Elkay
The main advantage of trading using opposite Federal Signal and Zurn Elkay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, Zurn Elkay 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 Zurn Elkay will offset losses from the drop in Zurn Elkay'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 |
| Zurn Elkay vs. Energy Recovery | Zurn Elkay vs. CECO Environmental Corp | Zurn Elkay vs. 374Water Common Stock | Zurn Elkay 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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