water spirit vs faerie

water spirit and faerie both are nouns.

Word	Noun	Adjective	Verb	Adverb
water spirit	Yes	No	No	No
faerie	Yes	No	No	No

As nouns, faerie is a hypernym of water spirit; that is, faerie is a word with a broader meaning than water spirit:

Other hypernyms of water spirit include faery, fairy, fay, sprite.

water spirit (noun)	faerie (noun)
a fairy that inhabits water	the enchanted realm of fairies
	a small being, human in form, playful and having magical powers