Correlation Between Aquagold International and Oil Equipment

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

By analyzing existing cross correlation between Aquagold International and Oil Equipment Services, you can compare the effects of market volatilities on Aquagold International and Oil Equipment 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 Oil Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquagold International and Oil Equipment.

Diversification Opportunities for Aquagold International and Oil Equipment

0.6

Correlation Coefficient

Aquagold International  Oil Equipment

Poor diversification

The 3 months correlation between Aquagold and Oil is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and Oil Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Equipment Services 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 Oil Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Equipment Services has no effect on the direction of Aquagold International i.e., Aquagold International and Oil Equipment go up and down completely randomly.

Pair Corralation between Aquagold International and Oil Equipment

Given the investment horizon of 90 days Aquagold International is expected to generate 13.89 times more return on investment than Oil Equipment. However, Aquagold International is 13.89 times more volatile than Oil Equipment Services. It trades about 0.06 of its potential returns per unit of risk. Oil Equipment Services is currently generating about 0.03 per unit of risk. If you would invest  29.00  in Aquagold International on January 17, 2024 and sell it today you would lose (28.40) from holding Aquagold International or give up 97.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Aquagold International  vs.  Oil Equipment Services

Aquagold International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aquagold International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Aquagold International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Oil Equipment Services

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Equipment Services are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oil Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aquagold International and Oil Equipment

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

The idea behind Aquagold International and Oil Equipment Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.