Correlation Between AVIC Heavy and Enviri

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

By analyzing existing cross correlation between AVIC Heavy Machinery and Enviri, you can compare the effects of market volatilities on AVIC Heavy and Enviri 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 AVIC Heavy with a short position of Enviri. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVIC Heavy and Enviri.

Diversification Opportunities for AVIC Heavy and Enviri

-0.57

Correlation Coefficient

AVIC Heavy  Enviri

Excellent diversification

The 3 months correlation between AVIC and Enviri is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding AVIC Heavy Machinery and Enviri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enviri and AVIC Heavy 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 AVIC Heavy Machinery are associated (or correlated) with Enviri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enviri has no effect on the direction of AVIC Heavy i.e., AVIC Heavy and Enviri go up and down completely randomly.

Pair Corralation between AVIC Heavy and Enviri

Assuming the 90 days trading horizon AVIC Heavy Machinery is expected to generate 0.78 times more return on investment than Enviri. However, AVIC Heavy Machinery is 1.29 times less risky than Enviri. It trades about 0.1 of its potential returns per unit of risk. Enviri is currently generating about -0.12 per unit of risk. If you would invest  1,730  in AVIC Heavy Machinery on September 5, 2024 and sell it today you would earn a total of  297.00  from holding AVIC Heavy Machinery or generate 17.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.06%
Values	Daily Returns

AVIC Heavy Machinery  vs.  Enviri

AVIC Heavy Machinery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Heavy Machinery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Enviri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enviri 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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with AVIC Heavy and Enviri

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

The idea behind AVIC Heavy Machinery and Enviri 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.