Correlation Between Green Resources and Aqua Public

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

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

Diversification Opportunities for Green Resources and Aqua Public

0.22

Correlation Coefficient

Green Resources  Aqua Public

Modest diversification

The 3 months correlation between Green and Aqua is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Green Resources Public and Aqua Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Public and Green Resources 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 Green Resources Public are associated (or correlated) with Aqua Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Public has no effect on the direction of Green Resources i.e., Green Resources and Aqua Public go up and down completely randomly.

Pair Corralation between Green Resources and Aqua Public

Assuming the 90 days trading horizon Green Resources Public is expected to generate 0.89 times more return on investment than Aqua Public. However, Green Resources Public is 1.12 times less risky than Aqua Public. It trades about 0.04 of its potential returns per unit of risk. Aqua Public is currently generating about -0.01 per unit of risk. If you would invest  103.00  in Green Resources Public on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Green Resources Public or generate 3.88% return on investment over 90 days.

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

Green Resources Public  vs.  Aqua Public

Green Resources Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Green Resources Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Green Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Aqua Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Aqua Public is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Green Resources and Aqua Public

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

The idea behind Green Resources Public and Aqua Public 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.