Correlation Between Waters and Thermo Fisher

Can any of the company-specific risk be diversified away by investing in both Waters and Thermo Fisher 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 Thermo Fisher into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waters and Thermo Fisher Scientific, you can compare the effects of market volatilities on Waters and Thermo Fisher 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 Thermo Fisher. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Thermo Fisher.

Diversification Opportunities for Waters and Thermo Fisher

0.79

Correlation Coefficient

Waters  Thermo Fisher

Poor diversification

The 3 months correlation between Waters and Thermo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Waters i.e., Waters and Thermo Fisher go up and down completely randomly.

Pair Corralation between Waters and Thermo Fisher

Considering the 90-day investment horizon Waters is expected to under-perform the Thermo Fisher. In addition to that, Waters is 1.49 times more volatile than Thermo Fisher Scientific. It trades about -0.02 of its total potential returns per unit of risk. Thermo Fisher Scientific is currently generating about 0.04 per unit of volatility. If you would invest  55,146  in Thermo Fisher Scientific on February 2, 2024 and sell it today you would earn a total of  1,544  from holding Thermo Fisher Scientific or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Waters  vs.  Thermo Fisher Scientific

Waters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Thermo Fisher Scientific

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thermo Fisher Scientific are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Waters and Thermo Fisher

The main advantage of trading using opposite Waters and Thermo Fisher positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, Thermo Fisher 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 Thermo Fisher will offset losses from the drop in Thermo Fisher's long position.

The idea behind Waters and Thermo Fisher Scientific 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.

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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.