Correlation Between Water Ways and ADF
Can any of the company-specific risk be diversified away by investing in both Water Ways and ADF 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 Water Ways and ADF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Water Ways Technologies and ADF Group, you can compare the effects of market volatilities on Water Ways and ADF 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 Water Ways with a short position of ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Water Ways and ADF.
Diversification Opportunities for Water Ways and ADF
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Water and ADF is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Water Ways Technologies and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and Water Ways 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 Water Ways Technologies are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of Water Ways i.e., Water Ways and ADF go up and down completely randomly.
Pair Corralation between Water Ways and ADF
Assuming the 90 days horizon Water Ways Technologies is expected to generate 4.28 times more return on investment than ADF. However, Water Ways is 4.28 times more volatile than ADF Group. It trades about 0.03 of its potential returns per unit of risk. ADF Group is currently generating about 0.07 per unit of risk. If you would invest 4.00 in Water Ways Technologies on September 3, 2024 and sell it today you would lose (3.50) from holding Water Ways Technologies or give up 87.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Water Ways Technologies vs. ADF Group
Performance |
| Timeline |
| Water Ways Technologies |
| ADF Group |
Water Ways and ADF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Water Ways and ADF
The main advantage of trading using opposite Water Ways and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Water Ways position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.| Water Ways vs. Alaris Equity Partners | Water Ways vs. Timbercreek Financial Corp | Water Ways vs. Fiera Capital | Water Ways vs. Diversified Royalty Corp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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