Correlation Between GP Global and Aquarius Engines

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

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

Diversification Opportunities for GP Global and Aquarius Engines

0.0

Correlation Coefficient

GP Global  Aquarius Engines

Pay attention - limited upside

The 3 months correlation between GPGB and Aquarius is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GP Global Power and Aquarius Engines AM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquarius Engines and GP Global 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 GP Global Power 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 GP Global i.e., GP Global and Aquarius Engines go up and down completely randomly.

Pair Corralation between GP Global and Aquarius Engines

Assuming the 90 days trading horizon GP Global Power is expected to generate 0.25 times more return on investment than Aquarius Engines. However, GP Global Power is 3.96 times less risky than Aquarius Engines. It trades about 0.02 of its potential returns per unit of risk. Aquarius Engines AM is currently generating about -0.02 per unit of risk. If you would invest  156,300  in GP Global Power on September 27, 2024 and sell it today you would earn a total of  6,900  from holding GP Global Power or generate 4.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.74%
Values	Daily Returns

GP Global Power  vs.  Aquarius Engines AM

GP Global Power

Risk-Adjusted Performance

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Very Weak

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

Pair Trading with GP Global and Aquarius Engines

The main advantage of trading using opposite GP Global and Aquarius Engines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Global 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 GP Global Power 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.