Correlation Between Aqua Power and China Health

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

By analyzing existing cross correlation between Aqua Power Systems and China Health Management, you can compare the effects of market volatilities on Aqua Power and China Health 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 Power with a short position of China Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua Power and China Health.

Diversification Opportunities for Aqua Power and China Health

-0.08

Correlation Coefficient

Aqua Power  China Health

Good diversification

The 3 months correlation between Aqua and China is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Power Systems and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and Aqua Power 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 Power Systems are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Aqua Power i.e., Aqua Power and China Health go up and down completely randomly.

Pair Corralation between Aqua Power and China Health

Given the investment horizon of 90 days Aqua Power Systems is expected to generate 0.9 times more return on investment than China Health. However, Aqua Power Systems is 1.11 times less risky than China Health. It trades about -0.04 of its potential returns per unit of risk. China Health Management is currently generating about -0.14 per unit of risk. If you would invest  2.47  in Aqua Power Systems on September 17, 2024 and sell it today you would lose (0.27) from holding Aqua Power Systems or give up 10.93% of portfolio value over 90 days.

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

Aqua Power Systems  vs.  China Health Management

Aqua Power Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua Power Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Aqua Power demonstrated solid returns over the last few months and may actually be approaching a breakup point.

China Health Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aqua Power and China Health

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

The idea behind Aqua Power Systems and China Health Management 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.