Correlation Between Aveng and Argent

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

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

Diversification Opportunities for Aveng and Argent

0.6

Correlation Coefficient

Aveng  Argent

Poor diversification

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

Pair Corralation between Aveng and Argent

Assuming the 90 days trading horizon Aveng is expected to generate 1.57 times more return on investment than Argent. However, Aveng is 1.57 times more volatile than Argent. It trades about 0.15 of its potential returns per unit of risk. Argent is currently generating about 0.14 per unit of risk. If you would invest  62,400  in Aveng on September 24, 2024 and sell it today you would earn a total of  53,400  from holding Aveng or generate 85.58% return on investment over 90 days.

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

Aveng  vs.  Argent

Aveng

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Argent

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Argent are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Argent is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aveng and Argent

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

The idea behind Aveng and Argent 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.