Correlation Between Waters and Amarin PLC
Can any of the company-specific risk be diversified away by investing in both Waters and Amarin PLC 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 Waters and Amarin PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and Amarin PLC, you can compare the effects of market volatilities on Waters and Amarin PLC 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 Waters with a short position of Amarin PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Amarin PLC.
Diversification Opportunities for Waters and Amarin PLC
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waters and Amarin is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Amarin PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarin PLC and Waters 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 Waters are associated (or correlated) with Amarin PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarin PLC has no effect on the direction of Waters i.e., Waters and Amarin PLC go up and down completely randomly.
Pair Corralation between Waters and Amarin PLC
Considering the 90-day investment horizon Waters is expected to generate 0.43 times more return on investment than Amarin PLC. However, Waters is 2.35 times less risky than Amarin PLC. It trades about 0.05 of its potential returns per unit of risk. Amarin PLC is currently generating about -0.02 per unit of risk. If you would invest 31,174 in Waters on September 3, 2024 and sell it today you would earn a total of 7,298 from holding Waters or generate 23.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waters vs. Amarin PLC
Performance |
| Timeline |
| Waters |
| Amarin PLC |
Waters and Amarin PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and Amarin PLC
The main advantage of trading using opposite Waters and Amarin PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, Amarin PLC 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 Amarin PLC will offset losses from the drop in Amarin PLC's long position.The idea behind Waters and Amarin PLC 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.| Amarin PLC vs. Pfizer Inc | Amarin PLC vs. Johnson Johnson | Amarin PLC vs. Highway Holdings Limited | Amarin PLC vs. QCR Holdings |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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