Correlation Between Watts Water and Kornit Digital
Can any of the company-specific risk be diversified away by investing in both Watts Water and Kornit Digital 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 Kornit Digital 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 Kornit Digital, you can compare the effects of market volatilities on Watts Water and Kornit Digital 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 Kornit Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watts Water and Kornit Digital.
Diversification Opportunities for Watts Water and Kornit Digital
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Watts and Kornit is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Watts Water Technologies and Kornit Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kornit Digital 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 Kornit Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kornit Digital has no effect on the direction of Watts Water i.e., Watts Water and Kornit Digital go up and down completely randomly.
Pair Corralation between Watts Water and Kornit Digital
Considering the 90-day investment horizon Watts Water is expected to generate 5.36 times less return on investment than Kornit Digital. But when comparing it to its historical volatility, Watts Water Technologies is 2.91 times less risky than Kornit Digital. It trades about 0.13 of its potential returns per unit of risk. Kornit Digital is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,782 in Kornit Digital on September 2, 2024 and sell it today you would earn a total of 1,398 from holding Kornit Digital or generate 78.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watts Water Technologies vs. Kornit Digital
Performance |
| Timeline |
| Watts Water Technologies |
| Kornit Digital |
Watts Water and Kornit Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watts Water and Kornit Digital
The main advantage of trading using opposite Watts Water and Kornit Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watts Water position performs unexpectedly, Kornit Digital 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 Kornit Digital will offset losses from the drop in Kornit Digital's long position.| Watts Water vs. IDEX Corporation | Watts Water vs. Donaldson | Watts Water vs. Gorman Rupp | Watts Water vs. Enerpac Tool Group |
| Kornit Digital vs. Middleby Corp | Kornit Digital vs. Enpro Industries | Kornit Digital vs. Kadant Inc | Kornit Digital vs. ITT Inc |
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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