Correlation Between Aqua America and Anheuser Busch

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

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

Diversification Opportunities for Aqua America and Anheuser Busch

0.14

Correlation Coefficient

Aqua America  Anheuser Busch

Average diversification

The 3 months correlation between Aqua and Anheuser is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev and Aqua America 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 Aqua America are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of Aqua America i.e., Aqua America and Anheuser Busch go up and down completely randomly.

Pair Corralation between Aqua America and Anheuser Busch

Assuming the 90 days horizon Aqua America is expected to generate 1.08 times more return on investment than Anheuser Busch. However, Aqua America is 1.08 times more volatile than Anheuser Busch InBev SANV. It trades about -0.1 of its potential returns per unit of risk. Anheuser Busch InBev SANV is currently generating about -0.3 per unit of risk. If you would invest  3,700  in Aqua America on October 22, 2024 and sell it today you would lose (323.00) from holding Aqua America or give up 8.73% of portfolio value over 90 days.

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

Aqua America  vs.  Anheuser Busch InBev SANV

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aqua America and Anheuser Busch

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

The idea behind Aqua America and Anheuser Busch InBev SANV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.