Correlation Between Fabxx and Aquila Three

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

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

Diversification Opportunities for Fabxx and Aquila Three

-0.39

Correlation Coefficient

Fabxx  Aquila Three

Very good diversification

The 3 months correlation between Fabxx and Aquila is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fabxx and Aquila Three Peaks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Three Peaks and Fabxx 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 Fabxx are associated (or correlated) with Aquila Three. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Three Peaks has no effect on the direction of Fabxx i.e., Fabxx and Aquila Three go up and down completely randomly.

Pair Corralation between Fabxx and Aquila Three

Assuming the 90 days horizon Fabxx is expected to under-perform the Aquila Three. In addition to that, Fabxx is 9.6 times more volatile than Aquila Three Peaks. It trades about -0.12 of its total potential returns per unit of risk. Aquila Three Peaks is currently generating about 0.19 per unit of volatility. If you would invest  4,222  in Aquila Three Peaks on September 2, 2024 and sell it today you would earn a total of  463.00  from holding Aquila Three Peaks or generate 10.97% return on investment over 90 days.

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

Fabxx  vs.  Aquila Three Peaks

Fabxx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fabxx has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly 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 fund investors.

Aquila Three Peaks

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aquila Three Peaks are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aquila Three may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fabxx and Aquila Three

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

The idea behind Fabxx and Aquila Three Peaks 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.