Correlation Between Aqua America and MAROC TELECOM

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

By analyzing existing cross correlation between Aqua America and MAROC TELECOM, you can compare the effects of market volatilities on Aqua America and MAROC TELECOM 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 MAROC TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua America and MAROC TELECOM.

Diversification Opportunities for Aqua America and MAROC TELECOM

-0.11

Correlation Coefficient

Aqua America  MAROC TELECOM

Good diversification

The 3 months correlation between Aqua and MAROC is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and MAROC TELECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAROC TELECOM 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 MAROC TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAROC TELECOM has no effect on the direction of Aqua America i.e., Aqua America and MAROC TELECOM go up and down completely randomly.

Pair Corralation between Aqua America and MAROC TELECOM

Assuming the 90 days horizon Aqua America is expected to under-perform the MAROC TELECOM. But the stock apears to be less risky and, when comparing its historical volatility, Aqua America is 3.16 times less risky than MAROC TELECOM. The stock trades about -0.02 of its potential returns per unit of risk. The MAROC TELECOM is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  337.00  in MAROC TELECOM on October 4, 2024 and sell it today you would earn a total of  443.00  from holding MAROC TELECOM or generate 131.45% return on investment over 90 days.

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

Aqua America  vs.  MAROC TELECOM

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.

MAROC TELECOM

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MAROC TELECOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MAROC TELECOM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aqua America and MAROC TELECOM

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

The idea behind Aqua America and MAROC TELECOM 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.