Correlation Between Munters Group and Bawat Water
Can any of the company-specific risk be diversified away by investing in both Munters Group and Bawat 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 Munters Group and Bawat Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Munters Group AB and Bawat Water Technologies, you can compare the effects of market volatilities on Munters Group and Bawat 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 Munters Group with a short position of Bawat Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Munters Group and Bawat Water.
Diversification Opportunities for Munters Group and Bawat Water
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Munters and Bawat is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Munters Group AB and Bawat Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bawat Water Technologies and Munters Group 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 Munters Group AB are associated (or correlated) with Bawat Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bawat Water Technologies has no effect on the direction of Munters Group i.e., Munters Group and Bawat Water go up and down completely randomly.
Pair Corralation between Munters Group and Bawat Water
Assuming the 90 days trading horizon Munters Group is expected to generate 3.28 times less return on investment than Bawat Water. But when comparing it to its historical volatility, Munters Group AB is 2.99 times less risky than Bawat Water. It trades about 0.04 of its potential returns per unit of risk. Bawat Water Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 116.00 in Bawat Water Technologies on August 29, 2024 and sell it today you would lose (9.00) from holding Bawat Water Technologies or give up 7.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Munters Group AB vs. Bawat Water Technologies
Performance |
| Timeline |
| Munters Group AB |
| Bawat Water Technologies |
Munters Group and Bawat Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Munters Group and Bawat Water
The main advantage of trading using opposite Munters Group and Bawat Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Munters Group position performs unexpectedly, Bawat 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 Bawat Water will offset losses from the drop in Bawat Water's long position.| Munters Group vs. Lindab International AB | Munters Group vs. Nolato AB | Munters Group vs. Trelleborg AB | Munters Group vs. BillerudKorsnas AB |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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