Correlation Between TOWNSQUARE MEDIA and Aqua America

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

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

Diversification Opportunities for TOWNSQUARE MEDIA and Aqua America

0.57

Correlation Coefficient

TOWNSQUARE MEDIA  Aqua America

Very weak diversification

The 3 months correlation between TOWNSQUARE and Aqua is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding TOWNSQUARE MEDIA INC and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA INC are associated (or correlated) with Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of TOWNSQUARE MEDIA i.e., TOWNSQUARE MEDIA and Aqua America go up and down completely randomly.

Pair Corralation between TOWNSQUARE MEDIA and Aqua America

Assuming the 90 days trading horizon TOWNSQUARE MEDIA INC is expected to under-perform the Aqua America. In addition to that, TOWNSQUARE MEDIA is 1.56 times more volatile than Aqua America. It trades about -0.01 of its total potential returns per unit of risk. Aqua America is currently generating about 0.02 per unit of volatility. If you would invest  3,358  in Aqua America on October 4, 2024 and sell it today you would earn a total of  92.00  from holding Aqua America or generate 2.74% return on investment over 90 days.

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

TOWNSQUARE MEDIA INC  vs.  Aqua America

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOWNSQUARE MEDIA INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TOWNSQUARE MEDIA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aqua America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aqua America is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TOWNSQUARE MEDIA and Aqua America

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

The idea behind TOWNSQUARE MEDIA INC and Aqua America 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 Transaction History module to view history of all your transactions and understand their impact on performance.