Correlation Between Zurn Elkay and Federal Signal
Can any of the company-specific risk be diversified away by investing in both Zurn Elkay and Federal Signal 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 Zurn Elkay and Federal Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zurn Elkay Water and Federal Signal, you can compare the effects of market volatilities on Zurn Elkay and Federal Signal 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 Zurn Elkay with a short position of Federal Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurn Elkay and Federal Signal.
Diversification Opportunities for Zurn Elkay and Federal Signal
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Zurn and Federal is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Zurn Elkay Water and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and Zurn Elkay 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 Zurn Elkay Water are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of Zurn Elkay i.e., Zurn Elkay and Federal Signal go up and down completely randomly.
Pair Corralation between Zurn Elkay and Federal Signal
Considering the 90-day investment horizon Zurn Elkay is expected to generate 1.33 times less return on investment than Federal Signal. In addition to that, Zurn Elkay is 1.01 times more volatile than Federal Signal. It trades about 0.06 of its total potential returns per unit of risk. Federal Signal is currently generating about 0.08 per unit of volatility. If you would invest 4,881 in Federal Signal on August 23, 2024 and sell it today you would earn a total of 4,601 from holding Federal Signal or generate 94.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zurn Elkay Water vs. Federal Signal
Performance |
| Timeline |
| Zurn Elkay Water |
| Federal Signal |
Zurn Elkay and Federal Signal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zurn Elkay and Federal Signal
The main advantage of trading using opposite Zurn Elkay and Federal Signal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurn Elkay position performs unexpectedly, Federal Signal 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 Federal Signal will offset losses from the drop in Federal Signal's long position.| Zurn Elkay vs. Energy Recovery | Zurn Elkay vs. CECO Environmental Corp | Zurn Elkay vs. 374Water Common Stock | Zurn Elkay vs. Federal Signal |
| Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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