Correlation Between MKS Instruments and Badger Meter

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

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

Diversification Opportunities for MKS Instruments and Badger Meter

0.68

Correlation Coefficient

MKS Instruments  Badger Meter

Poor diversification

The 3 months correlation between MKS and Badger is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MKS Instruments and Badger Meter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger Meter and MKS Instruments 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 MKS Instruments are associated (or correlated) with Badger Meter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger Meter has no effect on the direction of MKS Instruments i.e., MKS Instruments and Badger Meter go up and down completely randomly.

Pair Corralation between MKS Instruments and Badger Meter

Given the investment horizon of 90 days MKS Instruments is expected to generate 1.07 times less return on investment than Badger Meter. In addition to that, MKS Instruments is 1.46 times more volatile than Badger Meter. It trades about 0.05 of its total potential returns per unit of risk. Badger Meter is currently generating about 0.07 per unit of volatility. If you would invest  20,464  in Badger Meter on September 30, 2024 and sell it today you would earn a total of  1,081  from holding Badger Meter or generate 5.28% return on investment over 90 days.

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

MKS Instruments  vs.  Badger Meter

MKS Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MKS Instruments is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Badger Meter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Badger Meter has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Badger Meter is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MKS Instruments and Badger Meter

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

The idea behind MKS Instruments and Badger Meter 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.