Correlation Between Aqua Public and Dynasty Ceramic

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

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

Diversification Opportunities for Aqua Public and Dynasty Ceramic

0.21

Correlation Coefficient

Aqua Public  Dynasty Ceramic

Modest diversification

The 3 months correlation between Aqua and Dynasty is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Public and Dynasty Ceramic Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynasty Ceramic Public and Aqua Public 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 Public are associated (or correlated) with Dynasty Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynasty Ceramic Public has no effect on the direction of Aqua Public i.e., Aqua Public and Dynasty Ceramic go up and down completely randomly.

Pair Corralation between Aqua Public and Dynasty Ceramic

Assuming the 90 days trading horizon Aqua Public is expected to generate 98.83 times more return on investment than Dynasty Ceramic. However, Aqua Public is 98.83 times more volatile than Dynasty Ceramic Public. It trades about 0.13 of its potential returns per unit of risk. Dynasty Ceramic Public is currently generating about 0.01 per unit of risk. If you would invest  0.00  in Aqua Public on September 3, 2024 and sell it today you would earn a total of  34.00  from holding Aqua Public or generate 9.223372036854776E16% return on investment over 90 days.

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

Aqua Public  vs.  Dynasty Ceramic Public

Aqua Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Aqua Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dynasty Ceramic Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynasty Ceramic Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Dynasty Ceramic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aqua Public and Dynasty Ceramic

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

The idea behind Aqua Public and Dynasty Ceramic Public 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.