Correlation Between Aveng and Avi

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

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

Diversification Opportunities for Aveng and Avi

0.29

Correlation Coefficient

Aveng  Avi

Modest diversification

The 3 months correlation between Aveng and Avi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and Avi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avi 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 Avi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avi has no effect on the direction of Aveng i.e., Aveng and Avi go up and down completely randomly.

Pair Corralation between Aveng and Avi

Assuming the 90 days trading horizon Aveng is expected to generate 4.96 times less return on investment than Avi. In addition to that, Aveng is 2.27 times more volatile than Avi. It trades about 0.01 of its total potential returns per unit of risk. Avi is currently generating about 0.06 per unit of volatility. If you would invest  747,979  in Avi on October 12, 2024 and sell it today you would earn a total of  307,921  from holding Avi or generate 41.17% return on investment over 90 days.

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

Aveng  vs.  Avi

Aveng

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 18 (%) 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.

Avi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Avi 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 Avi

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

The idea behind Aveng and Avi 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.