Correlation Between Aquagold International and IShares Basic

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

By analyzing existing cross correlation between Aquagold International and iShares Basic Materials, you can compare the effects of market volatilities on Aquagold International and IShares Basic 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 Aquagold International with a short position of IShares Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquagold International and IShares Basic.

Diversification Opportunities for Aquagold International and IShares Basic

0.66

Correlation Coefficient

Aquagold International  IShares Basic

Poor diversification

The 3 months correlation between Aquagold and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials and Aquagold International 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 Aquagold International are associated (or correlated) with IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of Aquagold International i.e., Aquagold International and IShares Basic go up and down completely randomly.

Pair Corralation between Aquagold International and IShares Basic

Given the investment horizon of 90 days Aquagold International is expected to under-perform the IShares Basic. In addition to that, Aquagold International is 14.26 times more volatile than iShares Basic Materials. It trades about -0.17 of its total potential returns per unit of risk. iShares Basic Materials is currently generating about -0.1 per unit of volatility. If you would invest  14,700  in iShares Basic Materials on December 2, 2024 and sell it today you would lose (866.00) from holding iShares Basic Materials or give up 5.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Aquagold International  vs.  iShares Basic Materials

Aquagold International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aquagold International 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

iShares Basic Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Basic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Basic is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aquagold International and IShares Basic

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

The idea behind Aquagold International and iShares Basic Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.