Correlation Between GODM Investments and Aquarius Engines

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

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

Diversification Opportunities for GODM Investments and Aquarius Engines

0.86

Correlation Coefficient

GODM Investments  Aquarius Engines

Very poor diversification

The 3 months correlation between GODM and Aquarius is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GODM Investments and Aquarius Engines AM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquarius Engines and GODM Investments 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 GODM Investments are associated (or correlated) with Aquarius Engines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquarius Engines has no effect on the direction of GODM Investments i.e., GODM Investments and Aquarius Engines go up and down completely randomly.

Pair Corralation between GODM Investments and Aquarius Engines

Assuming the 90 days trading horizon GODM Investments is expected to generate 1.42 times more return on investment than Aquarius Engines. However, GODM Investments is 1.42 times more volatile than Aquarius Engines AM. It trades about 0.25 of its potential returns per unit of risk. Aquarius Engines AM is currently generating about 0.16 per unit of risk. If you would invest  2,250  in GODM Investments on November 30, 2024 and sell it today you would earn a total of  6,050  from holding GODM Investments or generate 268.89% return on investment over 90 days.

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

GODM Investments  vs.  Aquarius Engines AM

GODM Investments

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GODM Investments are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GODM Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Aquarius Engines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aquarius Engines AM are ranked lower than 12 (%) 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.

Pair Trading with GODM Investments and Aquarius Engines

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

The idea behind GODM Investments and Aquarius Engines AM 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.