Correlation Between Aqua America and Companhia
Can any of the company-specific risk be diversified away by investing in both Aqua America and Companhia 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 Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqua America and Companhia de Saneamento, you can compare the effects of market volatilities on Aqua America and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua America and Companhia.
Diversification Opportunities for Aqua America and Companhia
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Aqua and Companhia is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Aqua America i.e., Aqua America and Companhia go up and down completely randomly.
Pair Corralation between Aqua America and Companhia
Assuming the 90 days horizon Aqua America is expected to generate 0.73 times more return on investment than Companhia. However, Aqua America is 1.38 times less risky than Companhia. It trades about 0.05 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about -0.1 per unit of risk. If you would invest 3,341 in Aqua America on September 23, 2024 and sell it today you would earn a total of 129.00 from holding Aqua America or generate 3.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Aqua America vs. Companhia de Saneamento
Performance |
Timeline |
Aqua America |
Companhia de Saneamento |
Aqua America and Companhia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aqua America and Companhia
The main advantage of trading using opposite Aqua America and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqua America position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.Aqua America vs. American Water Works | Aqua America vs. United Utilities Group | Aqua America vs. Companhia de Saneamento | Aqua America vs. Guangdong Investment Limited |
Companhia vs. American Water Works | Companhia vs. Aqua America | Companhia vs. United Utilities Group | Companhia vs. Guangdong Investment Limited |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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