Correlation Between Federal Signal and 374Water Common

Can any of the company-specific risk be diversified away by investing in both Federal Signal and 374Water Common 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 Federal Signal and 374Water Common into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federal Signal and 374Water Common Stock, you can compare the effects of market volatilities on Federal Signal and 374Water Common 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 Federal Signal with a short position of 374Water Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and 374Water Common.

Diversification Opportunities for Federal Signal and 374Water Common

-0.54

Correlation Coefficient

Federal Signal  374Water Common

Excellent diversification

The 3 months correlation between Federal and 374Water is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and 374Water Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 374Water Common Stock and Federal Signal 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 Federal Signal are associated (or correlated) with 374Water Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 374Water Common Stock has no effect on the direction of Federal Signal i.e., Federal Signal and 374Water Common go up and down completely randomly.

Pair Corralation between Federal Signal and 374Water Common

Considering the 90-day investment horizon Federal Signal is expected to under-perform the 374Water Common. But the stock apears to be less risky and, when comparing its historical volatility, Federal Signal is 2.91 times less risky than 374Water Common. The stock trades about -0.3 of its potential returns per unit of risk. The 374Water Common Stock is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  127.00  in 374Water Common Stock on August 3, 2024 and sell it today you would earn a total of  29.00  from holding 374Water Common Stock or generate 22.83% return on investment over 90 days.

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

Federal Signal  vs.  374Water Common Stock

Federal Signal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Signal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

374Water Common Stock

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 374Water Common Stock are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, 374Water Common displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Signal and 374Water Common

The main advantage of trading using opposite Federal Signal and 374Water Common positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Signal position performs unexpectedly, 374Water Common 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 374Water Common will offset losses from the drop in 374Water Common's long position.

The idea behind Federal Signal and 374Water Common Stock 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.