Correlation Between Illumina and Waters
Can any of the company-specific risk be diversified away by investing in both Illumina 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 Illumina and Waters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Illumina and Waters, you can compare the effects of market volatilities on Illumina 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 Illumina with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illumina and Waters.
Diversification Opportunities for Illumina and Waters
Poor diversification
The 3 months correlation between Illumina and Waters is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Illumina 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 Illumina 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 Illumina i.e., Illumina and Waters go up and down completely randomly.
Pair Corralation between Illumina and Waters
Given the investment horizon of 90 days Illumina is expected to under-perform the Waters. But the stock apears to be less risky and, when comparing its historical volatility, Illumina is 1.99 times less risky than Waters. The stock trades about -0.16 of its potential returns per unit of risk. The Waters is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 33,943 in Waters on August 23, 2024 and sell it today you would earn a total of 1,834 from holding Waters or generate 5.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Illumina vs. Waters
Performance |
| Timeline |
| Illumina |
| Waters |
Illumina and Waters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illumina and Waters
The main advantage of trading using opposite Illumina and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illumina 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.| Illumina vs. Thermo Fisher Scientific | Illumina vs. Danaher | Illumina vs. Waters | Illumina vs. IDEXX Laboratories |
| 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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