Correlation Between Kurita Water and Evoqua Water

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Can any of the company-specific risk be diversified away by investing in both Kurita Water and Evoqua Water 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 Kurita Water and Evoqua Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kurita Water Inds and Evoqua Water Technologies, you can compare the effects of market volatilities on Kurita Water and Evoqua Water 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 Kurita Water with a short position of Evoqua Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kurita Water and Evoqua Water.

Diversification Opportunities for Kurita Water and Evoqua Water

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Kurita and Evoqua is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kurita Water Inds and Evoqua Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evoqua Water Technologies and Kurita 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 Kurita Water Inds are associated (or correlated) with Evoqua Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evoqua Water Technologies has no effect on the direction of Kurita Water i.e., Kurita Water and Evoqua Water go up and down completely randomly.

Pair Corralation between Kurita Water and Evoqua Water

Assuming the 90 days horizon Kurita Water Inds is expected to generate 49.8 times more return on investment than Evoqua Water. However, Kurita Water is 49.8 times more volatile than Evoqua Water Technologies. It trades about 0.17 of its potential returns per unit of risk. Evoqua Water Technologies is currently generating about 0.06 per unit of risk. If you would invest  31.00  in Kurita Water Inds on May 9, 2022 and sell it today you would earn a total of  3,842  from holding Kurita Water Inds or generate 12393.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Kurita Water Inds  vs.  Evoqua Water Technologies

 Performance (%) 
       Timeline  
Kurita Water Inds 
Kurita Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kurita Water Inds are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Kurita Water exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kurita Price Channel

Evoqua Water Technologies 
Evoqua Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Evoqua Water Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Evoqua Water may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Evoqua Price Channel

Kurita Water and Evoqua Water Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kurita Water and Evoqua Water

The main advantage of trading using opposite Kurita Water and Evoqua Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kurita Water position performs unexpectedly, Evoqua Water 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 Evoqua Water will offset losses from the drop in Evoqua Water's long position.
The idea behind Kurita Water Inds and Evoqua Water Technologies 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.
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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