Correlation Between Absolute Health and Aqua Power

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

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

Diversification Opportunities for Absolute Health and Aqua Power

-0.58

Correlation Coefficient

Absolute Health  Aqua Power

Excellent diversification

The 3 months correlation between Absolute and Aqua is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Health and and Aqua Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Power Systems and Absolute Health 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 Absolute Health and are associated (or correlated) with Aqua Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Power Systems has no effect on the direction of Absolute Health i.e., Absolute Health and Aqua Power go up and down completely randomly.

Pair Corralation between Absolute Health and Aqua Power

Given the investment horizon of 90 days Absolute Health and is expected to under-perform the Aqua Power. In addition to that, Absolute Health is 1.07 times more volatile than Aqua Power Systems. It trades about -0.12 of its total potential returns per unit of risk. Aqua Power Systems is currently generating about 0.1 per unit of volatility. If you would invest  1.66  in Aqua Power Systems on September 14, 2024 and sell it today you would earn a total of  0.69  from holding Aqua Power Systems or generate 41.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Absolute Health and  vs.  Aqua Power Systems

Absolute Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Health and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Aqua Power Systems

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua Power Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Aqua Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Absolute Health and Aqua Power

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

The idea behind Absolute Health and and Aqua Power Systems 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.