Correlation Between Aqua America and Aqua Metals

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

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

Diversification Opportunities for Aqua America and Aqua Metals

-0.29

Correlation Coefficient

Aqua America  Aqua Metals

Very good diversification

The 3 months correlation between Aqua and Aqua is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and Aqua Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Metals 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 Aqua Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Metals has no effect on the direction of Aqua America i.e., Aqua America and Aqua Metals go up and down completely randomly.

Pair Corralation between Aqua America and Aqua Metals

Assuming the 90 days trading horizon Aqua America is expected to generate 0.41 times more return on investment than Aqua Metals. However, Aqua America is 2.45 times less risky than Aqua Metals. It trades about 0.02 of its potential returns per unit of risk. Aqua Metals is currently generating about -0.1 per unit of risk. If you would invest  3,428  in Aqua America on October 6, 2024 and sell it today you would earn a total of  24.00  from holding Aqua America or generate 0.7% 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.  Aqua Metals

Aqua America

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Aqua America is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Aqua Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aqua America and Aqua Metals

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

The idea behind Aqua America and Aqua Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.