Correlation Between Waters and China New
Can any of the company-specific risk be diversified away by investing in both Waters and China New 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 China New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and China New Energy, you can compare the effects of market volatilities on Waters and China New 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 China New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and China New.
Diversification Opportunities for Waters and China New
Very good diversification
The 3 months correlation between Waters and China is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Waters and China New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China New Energy 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 China New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China New Energy has no effect on the direction of Waters i.e., Waters and China New go up and down completely randomly.
Pair Corralation between Waters and China New
Considering the 90-day investment horizon Waters is expected to under-perform the China New. But the stock apears to be less risky and, when comparing its historical volatility, Waters is 11.88 times less risky than China New. The stock trades about -0.01 of its potential returns per unit of risk. The China New Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 0.80 in China New Energy on November 27, 2024 and sell it today you would lose (0.30) from holding China New Energy or give up 37.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waters vs. China New Energy
Performance |
| Timeline |
| Waters |
| China New Energy |
Waters and China New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and China New
The main advantage of trading using opposite Waters and China New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, China New 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 China New will offset losses from the drop in China New's long position.| Waters vs. IDEXX Laboratories | Waters vs. IQVIA Holdings | Waters vs. Charles River Laboratories | Waters vs. Revvity |
| China New vs. Sonic Healthcare Ltd | China New vs. Lonza Group | China New vs. Charles River Laboratories | China New vs. Qiagen NV |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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