Correlation Between Fundamental Global and Waterdrop ADR

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

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

Diversification Opportunities for Fundamental Global and Waterdrop ADR

-0.49

Correlation Coefficient

Fundamental Global  Waterdrop ADR

Very good diversification

The 3 months correlation between Fundamental and Waterdrop is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Global and Waterdrop ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterdrop ADR and Fundamental Global 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 Fundamental Global are associated (or correlated) with Waterdrop ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterdrop ADR has no effect on the direction of Fundamental Global i.e., Fundamental Global and Waterdrop ADR go up and down completely randomly.

Pair Corralation between Fundamental Global and Waterdrop ADR

Considering the 90-day investment horizon Fundamental Global is expected to under-perform the Waterdrop ADR. But the stock apears to be less risky and, when comparing its historical volatility, Fundamental Global is 1.07 times less risky than Waterdrop ADR. The stock trades about -0.09 of its potential returns per unit of risk. The Waterdrop ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  114.00  in Waterdrop ADR on January 12, 2025 and sell it today you would earn a total of  7.00  from holding Waterdrop ADR or generate 6.14% return on investment over 90 days.

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

Fundamental Global  vs.  Waterdrop ADR

Fundamental Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Global 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Waterdrop ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waterdrop ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Waterdrop ADR may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Fundamental Global and Waterdrop ADR

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

The idea behind Fundamental Global and Waterdrop ADR 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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.