Correlation Between Waters and Lonza Group
Can any of the company-specific risk be diversified away by investing in both Waters and Lonza Group 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 Lonza Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and Lonza Group, you can compare the effects of market volatilities on Waters and Lonza Group 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 Lonza Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Lonza Group.
Diversification Opportunities for Waters and Lonza Group
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waters and Lonza is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Lonza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group 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 Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group has no effect on the direction of Waters i.e., Waters and Lonza Group go up and down completely randomly.
Pair Corralation between Waters and Lonza Group
Considering the 90-day investment horizon Waters is expected to generate 0.73 times more return on investment than Lonza Group. However, Waters is 1.37 times less risky than Lonza Group. It trades about -0.01 of its potential returns per unit of risk. Lonza Group is currently generating about -0.01 per unit of risk. If you would invest 38,734 in Waters on September 3, 2024 and sell it today you would lose (262.00) from holding Waters or give up 0.68% 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. Lonza Group
Performance |
| Timeline |
| Waters |
| Lonza Group |
Waters and Lonza Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and Lonza Group
The main advantage of trading using opposite Waters and Lonza Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, Lonza Group 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 Lonza Group will offset losses from the drop in Lonza Group's long position.The idea behind Waters and Lonza Group 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.| Lonza Group vs. China New Energy | Lonza Group vs. Sonic Healthcare Ltd | Lonza Group vs. Charles River Laboratories | Lonza Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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