Correlation Between Wave Entertainment and Aqua Public

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

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

Diversification Opportunities for Wave Entertainment and Aqua Public

0.62

Correlation Coefficient

Wave Entertainment  Aqua Public

Poor diversification

The 3 months correlation between Wave and Aqua is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Wave Entertainment Public and Aqua Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Public and Wave Entertainment 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 Wave Entertainment 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 Wave Entertainment i.e., Wave Entertainment and Aqua Public go up and down completely randomly.

Pair Corralation between Wave Entertainment and Aqua Public

Assuming the 90 days trading horizon Wave Entertainment Public is expected to under-perform the Aqua Public. In addition to that, Wave Entertainment is 1.99 times more volatile than Aqua Public. It trades about -0.11 of its total potential returns per unit of risk. Aqua Public is currently generating about -0.01 per unit of volatility. If you would invest  35.00  in Aqua Public on September 15, 2024 and sell it today you would lose (1.00) from holding Aqua Public or give up 2.86% of portfolio value over 90 days.

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

Wave Entertainment Public  vs.  Aqua Public

Wave Entertainment Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wave Entertainment Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 Wave Entertainment and Aqua Public

The main advantage of trading using opposite Wave Entertainment and Aqua Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wave Entertainment 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 Wave Entertainment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.