Correlation Between Charles River and Waters

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

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

Diversification Opportunities for Charles River and Waters

0.46

Correlation Coefficient

Charles River  Waters

Very weak diversification

The 3 months correlation between Charles and Waters is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Charles River Laboratories and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters and Charles River 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 Charles River Laboratories 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 Charles River i.e., Charles River and Waters go up and down completely randomly.

Pair Corralation between Charles River and Waters

Considering the 90-day investment horizon Charles River Laboratories is expected to under-perform the Waters. In addition to that, Charles River is 1.09 times more volatile than Waters. It trades about -0.03 of its total potential returns per unit of risk. Waters is currently generating about 0.02 per unit of volatility. If you would invest  26,781  in Waters on January 10, 2025 and sell it today you would earn a total of  3,990  from holding Waters or generate 14.9% return on investment over 90 days.

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

Charles River Laboratories  vs.  Waters

Charles River Labora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charles River Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Waters

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Charles River and Waters

The main advantage of trading using opposite Charles River and Waters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles River 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 Charles River Laboratories 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.