Correlation Between Aquarius Engines and B Communications

Can any of the company-specific risk be diversified away by investing in both Aquarius Engines and B Communications 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 Aquarius Engines and B Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aquarius Engines AM and B Communications, you can compare the effects of market volatilities on Aquarius Engines and B Communications 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 Aquarius Engines with a short position of B Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquarius Engines and B Communications.

Diversification Opportunities for Aquarius Engines and B Communications

-0.65

Correlation Coefficient

Aquarius Engines  B Communications

Excellent diversification

The 3 months correlation between Aquarius and BCOM is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aquarius Engines AM and B Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Communications and Aquarius Engines 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 Aquarius Engines AM are associated (or correlated) with B Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Communications has no effect on the direction of Aquarius Engines i.e., Aquarius Engines and B Communications go up and down completely randomly.

Pair Corralation between Aquarius Engines and B Communications

Assuming the 90 days trading horizon Aquarius Engines AM is expected to generate 2.79 times more return on investment than B Communications. However, Aquarius Engines is 2.79 times more volatile than B Communications. It trades about 0.02 of its potential returns per unit of risk. B Communications is currently generating about 0.05 per unit of risk. If you would invest  13,040  in Aquarius Engines AM on September 24, 2024 and sell it today you would lose (1,380) from holding Aquarius Engines AM or give up 10.58% of portfolio value over 90 days.

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

Aquarius Engines AM  vs.  B Communications

Aquarius Engines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquarius Engines AM 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

B Communications

Risk-Adjusted Performance

23 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in B Communications are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aquarius Engines and B Communications

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

The idea behind Aquarius Engines AM and B Communications 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.