Correlation Between IQVIA Holdings and Waters

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

By analyzing existing cross correlation between IQVIA Holdings and Waters, you can compare the effects of market volatilities on IQVIA Holdings and Waters 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 IQVIA Holdings with a short position of Waters. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQVIA Holdings and Waters.

Diversification Opportunities for IQVIA Holdings and Waters

0.62

Correlation Coefficient

IQVIA Holdings  Waters

Poor diversification

The 3 months correlation between IQVIA and Waters is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding IQVIA Holdings and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and IQVIA Holdings 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 IQVIA Holdings are associated (or correlated) with Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of IQVIA Holdings i.e., IQVIA Holdings and Waters go up and down completely randomly.

Pair Corralation between IQVIA Holdings and Waters

Considering the 90-day investment horizon IQVIA Holdings is expected to under-perform the Waters. But the stock apears to be less risky and, when comparing its historical volatility, IQVIA Holdings is 1.26 times less risky than Waters. The stock trades about -0.01 of its potential returns per unit of risk. The Waters is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  32,395  in Waters on February 19, 2024 and sell it today you would earn a total of  3,200  from holding Waters or generate 9.88% return on investment over 90 days.

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

IQVIA Holdings  vs.  Waters

IQVIA Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQVIA Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IQVIA Holdings is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Waters

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with IQVIA Holdings and Waters

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

The idea behind IQVIA Holdings and Waters 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.