Correlation Between Aquarius Engines and Inrom Construction

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

By analyzing existing cross correlation between Aquarius Engines AM and Inrom Construction Industries, you can compare the effects of market volatilities on Aquarius Engines and Inrom Construction 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 Aquarius Engines with a short position of Inrom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquarius Engines and Inrom Construction.

Diversification Opportunities for Aquarius Engines and Inrom Construction

0.28

Correlation Coefficient

Aquarius Engines  Inrom Construction

Modest diversification

The 3 months correlation between Aquarius and Inrom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aquarius Engines AM and Inrom Construction Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inrom Construction and Aquarius Engines 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 Aquarius Engines AM are associated (or correlated) with Inrom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inrom Construction has no effect on the direction of Aquarius Engines i.e., Aquarius Engines and Inrom Construction go up and down completely randomly.

Pair Corralation between Aquarius Engines and Inrom Construction

Assuming the 90 days trading horizon Aquarius Engines AM is expected to generate 3.84 times more return on investment than Inrom Construction. However, Aquarius Engines is 3.84 times more volatile than Inrom Construction Industries. It trades about 0.11 of its potential returns per unit of risk. Inrom Construction Industries is currently generating about -0.08 per unit of risk. If you would invest  13,970  in Aquarius Engines AM on December 25, 2024 and sell it today you would earn a total of  5,720  from holding Aquarius Engines AM or generate 40.94% return on investment over 90 days.

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

Aquarius Engines AM  vs.  Inrom Construction Industries

Aquarius Engines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aquarius Engines AM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aquarius Engines sustained solid returns over the last few months and may actually be approaching a breakup point.

Inrom Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inrom Construction Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Aquarius Engines and Inrom Construction

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

The idea behind Aquarius Engines AM and Inrom Construction Industries 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.