Correlation Between Trimble and Badger Meter
Can any of the company-specific risk be diversified away by investing in both Trimble and Badger Meter 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 Trimble and Badger Meter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trimble and Badger Meter, you can compare the effects of market volatilities on Trimble and Badger Meter 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 Trimble with a short position of Badger Meter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trimble and Badger Meter.
Diversification Opportunities for Trimble and Badger Meter
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trimble and Badger is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Badger Meter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger Meter and Trimble 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 Trimble are associated (or correlated) with Badger Meter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger Meter has no effect on the direction of Trimble i.e., Trimble and Badger Meter go up and down completely randomly.
Pair Corralation between Trimble and Badger Meter
Given the investment horizon of 90 days Trimble is expected to generate 1.86 times less return on investment than Badger Meter. But when comparing it to its historical volatility, Trimble is 1.05 times less risky than Badger Meter. It trades about 0.06 of its potential returns per unit of risk. Badger Meter is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 15,796 in Badger Meter on August 27, 2024 and sell it today you would earn a total of 6,304 from holding Badger Meter or generate 39.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trimble vs. Badger Meter
Performance |
| Timeline |
| Trimble |
| Badger Meter |
Trimble and Badger Meter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trimble and Badger Meter
The main advantage of trading using opposite Trimble and Badger Meter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trimble position performs unexpectedly, Badger Meter 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 Badger Meter will offset losses from the drop in Badger Meter's long position.The idea behind Trimble and Badger Meter pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Badger Meter vs. ESCO Technologies | Badger Meter vs. Genasys | Badger Meter vs. Cepton Inc | Badger Meter vs. Darkpulse |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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