Correlation Between Easy Software and Aqua America

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

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

Diversification Opportunities for Easy Software and Aqua America

-0.21

Correlation Coefficient

Easy Software  Aqua America

Very good diversification

The 3 months correlation between Easy and Aqua is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Easy Software AG and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America and Easy Software 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 Easy Software AG 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 Easy Software i.e., Easy Software and Aqua America go up and down completely randomly.

Pair Corralation between Easy Software and Aqua America

Assuming the 90 days trading horizon Easy Software AG is expected to under-perform the Aqua America. In addition to that, Easy Software is 1.37 times more volatile than Aqua America. It trades about -0.02 of its total potential returns per unit of risk. Aqua America is currently generating about 0.06 per unit of volatility. If you would invest  3,418  in Aqua America on December 20, 2024 and sell it today you would earn a total of  169.00  from holding Aqua America or generate 4.94% return on investment over 90 days.

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

Easy Software AG  vs.  Aqua America

Easy Software AG

Risk-Adjusted Performance

Very Weak

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

Aqua America

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aqua America are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Aqua America is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Easy Software and Aqua America

The main advantage of trading using opposite Easy Software and Aqua America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Easy Software 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 Easy Software AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..