Correlation Between Aqua Public and Smart Concrete

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

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

Diversification Opportunities for Aqua Public and Smart Concrete

0.7

Correlation Coefficient

Aqua Public  Smart Concrete

Poor diversification

The 3 months correlation between Aqua and Smart is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aqua Public and Smart Concrete Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Concrete 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 Smart Concrete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Concrete Public has no effect on the direction of Aqua Public i.e., Aqua Public and Smart Concrete go up and down completely randomly.

Pair Corralation between Aqua Public and Smart Concrete

Assuming the 90 days trading horizon Aqua Public is expected to under-perform the Smart Concrete. In addition to that, Aqua Public is 1.06 times more volatile than Smart Concrete Public. It trades about -0.23 of its total potential returns per unit of risk. Smart Concrete Public is currently generating about -0.1 per unit of volatility. If you would invest  75.00  in Smart Concrete Public on December 22, 2024 and sell it today you would lose (12.00) from holding Smart Concrete Public or give up 16.0% of portfolio value over 90 days.

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

Aqua Public  vs.  Smart Concrete Public

Aqua Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aqua Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Smart Concrete Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smart Concrete Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aqua Public and Smart Concrete

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

The idea behind Aqua Public and Smart Concrete 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.