Correlation Between TARGA and Aquestive Therapeutics

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

By analyzing existing cross correlation between TARGA RES PARTNERS and Aquestive Therapeutics, you can compare the effects of market volatilities on TARGA and Aquestive Therapeutics 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 TARGA with a short position of Aquestive Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TARGA and Aquestive Therapeutics.

Diversification Opportunities for TARGA and Aquestive Therapeutics

-0.46

Correlation Coefficient

TARGA  Aquestive Therapeutics

Very good diversification

The 3 months correlation between TARGA and Aquestive is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding TARGA RES PARTNERS and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics and TARGA 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 TARGA RES PARTNERS are associated (or correlated) with Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of TARGA i.e., TARGA and Aquestive Therapeutics go up and down completely randomly.

Pair Corralation between TARGA and Aquestive Therapeutics

Assuming the 90 days trading horizon TARGA RES PARTNERS is expected to under-perform the Aquestive Therapeutics. But the bond apears to be less risky and, when comparing its historical volatility, TARGA RES PARTNERS is 27.42 times less risky than Aquestive Therapeutics. The bond trades about -0.1 of its potential returns per unit of risk. The Aquestive Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Aquestive Therapeutics on September 3, 2024 and sell it today you would earn a total of  90.00  from holding Aquestive Therapeutics or generate 21.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

TARGA RES PARTNERS  vs.  Aquestive Therapeutics

TARGA RES PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aquestive Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aquestive Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Aquestive Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TARGA and Aquestive Therapeutics

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

The idea behind TARGA RES PARTNERS and Aquestive Therapeutics 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.