Correlation Between Aqua Power and Four Leaf

Can any of the company-specific risk be diversified away by investing in both Aqua Power and Four Leaf 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 Four Leaf 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 Four Leaf Acquisition, you can compare the effects of market volatilities on Aqua Power and Four Leaf 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 Four Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua Power and Four Leaf.

Diversification Opportunities for Aqua Power and Four Leaf

0.56

Correlation Coefficient

Aqua Power  Four Leaf

Very weak diversification

The 3 months correlation between Aqua and Four is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Power Systems and Four Leaf Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Leaf Acquisition 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 Four Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Leaf Acquisition has no effect on the direction of Aqua Power i.e., Aqua Power and Four Leaf go up and down completely randomly.

Pair Corralation between Aqua Power and Four Leaf

Given the investment horizon of 90 days Aqua Power Systems is expected to generate 13.58 times more return on investment than Four Leaf. However, Aqua Power is 13.58 times more volatile than Four Leaf Acquisition. It trades about 0.14 of its potential returns per unit of risk. Four Leaf Acquisition is currently generating about 0.16 per unit of risk. If you would invest  1.88  in Aqua Power Systems on December 24, 2024 and sell it today you would earn a total of  0.61  from holding Aqua Power Systems or generate 32.45% return on investment over 90 days.

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

Aqua Power Systems  vs.  Four Leaf Acquisition

Aqua Power Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua Power Systems are ranked lower than 11 (%) 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.

Four Leaf Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aqua Power and Four Leaf

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

The idea behind Aqua Power Systems and Four Leaf Acquisition 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.