Correlation Between Aqua America and TTW Public

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

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

Diversification Opportunities for Aqua America and TTW Public

-0.36

Correlation Coefficient

Aqua America  TTW Public

Very good diversification

The 3 months correlation between Aqua and TTW is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and TTW Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW Public and Aqua America 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 Aqua America are associated (or correlated) with TTW Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW Public has no effect on the direction of Aqua America i.e., Aqua America and TTW Public go up and down completely randomly.

Pair Corralation between Aqua America and TTW Public

Assuming the 90 days horizon Aqua America is expected to generate 1.35 times less return on investment than TTW Public. But when comparing it to its historical volatility, Aqua America is 1.66 times less risky than TTW Public. It trades about 0.05 of its potential returns per unit of risk. TTW Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24.00  in TTW Public on September 23, 2024 and sell it today you would earn a total of  1.00  from holding TTW Public or generate 4.17% return on investment over 90 days.

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

Aqua America  vs.  TTW Public

Aqua America

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua America are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aqua America is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TTW Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TTW Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TTW Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aqua America and TTW Public

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

The idea behind Aqua America and TTW Public 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.