Correlation Between CELLULAR GOODS and Aqua America

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Can any of the company-specific risk be diversified away by investing in both CELLULAR GOODS 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 CELLULAR GOODS and Aqua America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CELLULAR GOODS LS and Aqua America, you can compare the effects of market volatilities on CELLULAR GOODS 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 CELLULAR GOODS with a short position of Aqua America. Check out your portfolio center. Please also check ongoing floating volatility patterns of CELLULAR GOODS and Aqua America.

Diversification Opportunities for CELLULAR GOODS and Aqua America

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between CELLULAR and Aqua is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CELLULAR GOODS LS and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America and CELLULAR GOODS 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 CELLULAR GOODS LS 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 CELLULAR GOODS i.e., CELLULAR GOODS and Aqua America go up and down completely randomly.

Pair Corralation between CELLULAR GOODS and Aqua America

Assuming the 90 days horizon CELLULAR GOODS LS is expected to generate 52.14 times more return on investment than Aqua America. However, CELLULAR GOODS is 52.14 times more volatile than Aqua America. It trades about 0.12 of its potential returns per unit of risk. Aqua America is currently generating about -0.02 per unit of risk. If you would invest  0.10  in CELLULAR GOODS LS on October 4, 2024 and sell it today you would lose (0.05) from holding CELLULAR GOODS LS or give up 50.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CELLULAR GOODS LS  vs.  Aqua America

 Performance 
       Timeline  
CELLULAR GOODS LS 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

CELLULAR GOODS and Aqua America Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CELLULAR GOODS and Aqua America

The main advantage of trading using opposite CELLULAR GOODS and Aqua America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CELLULAR GOODS 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 CELLULAR GOODS LS 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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