Correlation Between Carmit and Aquarius Engines

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

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

Diversification Opportunities for Carmit and Aquarius Engines

-0.71

Correlation Coefficient

Carmit  Aquarius Engines

Pay attention - limited upside

The 3 months correlation between Carmit and Aquarius is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Carmit and Aquarius Engines AM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquarius Engines and Carmit 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 Carmit are associated (or correlated) with Aquarius Engines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquarius Engines has no effect on the direction of Carmit i.e., Carmit and Aquarius Engines go up and down completely randomly.

Pair Corralation between Carmit and Aquarius Engines

Assuming the 90 days trading horizon Carmit is expected to under-perform the Aquarius Engines. But the stock apears to be less risky and, when comparing its historical volatility, Carmit is 2.09 times less risky than Aquarius Engines. The stock trades about -0.05 of its potential returns per unit of risk. The Aquarius Engines AM is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,760  in Aquarius Engines AM on September 24, 2024 and sell it today you would lose (100.00) from holding Aquarius Engines AM or give up 0.85% of portfolio value over 90 days.

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

Carmit  vs.  Aquarius Engines AM

Carmit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Carmit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Carmit and Aquarius Engines

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

The idea behind Carmit and Aquarius Engines AM 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.