Correlation Between Kamada and Aquarius Engines

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

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

Diversification Opportunities for Kamada and Aquarius Engines

-0.4

Correlation Coefficient

Kamada  Aquarius Engines

Very good diversification

The 3 months correlation between Kamada and Aquarius is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and Aquarius Engines AM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquarius Engines and Kamada 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 Kamada 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 Kamada i.e., Kamada and Aquarius Engines go up and down completely randomly.

Pair Corralation between Kamada and Aquarius Engines

Assuming the 90 days trading horizon Kamada is expected to generate 0.35 times more return on investment than Aquarius Engines. However, Kamada is 2.86 times less risky than Aquarius Engines. It trades about 0.14 of its potential returns per unit of risk. Aquarius Engines AM is currently generating about -0.01 per unit of risk. If you would invest  199,200  in Kamada on September 28, 2024 and sell it today you would earn a total of  20,800  from holding Kamada or generate 10.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.87%
Values	Daily Returns

Kamada  vs.  Aquarius Engines AM

Kamada

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamada are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kamada sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Kamada and Aquarius Engines

The main advantage of trading using opposite Kamada and Aquarius Engines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kamada 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 Kamada 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..