Correlation Between Aqua Metals and Aqua America

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

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

Diversification Opportunities for Aqua Metals and Aqua America

-0.57

Correlation Coefficient

Aqua Metals  Aqua America

Excellent diversification

The 3 months correlation between Aqua and Aqua is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Metals and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America and Aqua Metals 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 Metals are associated (or correlated) with Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of Aqua Metals i.e., Aqua Metals and Aqua America go up and down completely randomly.

Pair Corralation between Aqua Metals and Aqua America

Assuming the 90 days trading horizon Aqua Metals is expected to under-perform the Aqua America. In addition to that, Aqua Metals is 3.53 times more volatile than Aqua America. It trades about -0.07 of its total potential returns per unit of risk. Aqua America is currently generating about -0.02 per unit of volatility. If you would invest  4,178  in Aqua America on October 4, 2024 and sell it today you would lose (728.00) from holding Aqua America or give up 17.42% of portfolio value over 90 days.

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

Aqua Metals  vs.  Aqua America

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 uncertain 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.

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.

Pair Trading with Aqua Metals and Aqua America

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

The idea behind Aqua Metals and Aqua America 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.