Correlation Between Digital World and Aqua Power
Can any of the company-specific risk be diversified away by investing in both Digital World and Aqua Power 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 Digital World and Aqua Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital World Acquisition and Aqua Power Systems, you can compare the effects of market volatilities on Digital World and Aqua Power 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 Digital World with a short position of Aqua Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital World and Aqua Power.
Diversification Opportunities for Digital World and Aqua Power
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Digital and Aqua is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Digital World Acquisition and Aqua Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua Power Systems and Digital World 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 Digital World Acquisition are associated (or correlated) with Aqua Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua Power Systems has no effect on the direction of Digital World i.e., Digital World and Aqua Power go up and down completely randomly.
Pair Corralation between Digital World and Aqua Power
If you would invest 0.90 in Aqua Power Systems on September 4, 2024 and sell it today you would earn a total of 1.53 from holding Aqua Power Systems or generate 170.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 0.4% |
| Values | Daily Returns |
Digital World Acquisition vs. Aqua Power Systems
Performance |
| Timeline |
| Digital World Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Aqua Power Systems |
Digital World and Aqua Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital World and Aqua Power
The main advantage of trading using opposite Digital World and Aqua Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital World position performs unexpectedly, Aqua Power 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 Power will offset losses from the drop in Aqua Power's long position.The idea behind Digital World Acquisition and Aqua Power Systems 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.| Aqua Power vs. Manaris Corp | Aqua Power vs. Green Planet Bio | Aqua Power vs. Continental Beverage Brands | Aqua Power vs. Opus Magnum Ameris |
Check out your portfolio center.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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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