Correlation Between Watts Water and Graham
Can any of the company-specific risk be diversified away by investing in both Watts Water and Graham 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 Watts Water and Graham into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watts Water Technologies and Graham, you can compare the effects of market volatilities on Watts Water and Graham 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 Watts Water with a short position of Graham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watts Water and Graham.
Diversification Opportunities for Watts Water and Graham
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Watts and Graham is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Watts Water Technologies and Graham in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham and Watts Water 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 Watts Water Technologies are associated (or correlated) with Graham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham has no effect on the direction of Watts Water i.e., Watts Water and Graham go up and down completely randomly.
Pair Corralation between Watts Water and Graham
Considering the 90-day investment horizon Watts Water is expected to generate 4.27 times less return on investment than Graham. But when comparing it to its historical volatility, Watts Water Technologies is 2.38 times less risky than Graham. It trades about 0.28 of its potential returns per unit of risk. Graham is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 2,823 in Graham on September 2, 2024 and sell it today you would earn a total of 1,659 from holding Graham or generate 58.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watts Water Technologies vs. Graham
Performance |
| Timeline |
| Watts Water Technologies |
| Graham |
Watts Water and Graham Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watts Water and Graham
The main advantage of trading using opposite Watts Water and Graham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watts Water position performs unexpectedly, Graham 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 Graham will offset losses from the drop in Graham's long position.| Watts Water vs. IDEX Corporation | Watts Water vs. Donaldson | Watts Water vs. Gorman Rupp | Watts Water vs. Enerpac Tool Group |
| Graham vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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