Correlation Between Aveng and Rex Trueform

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

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

Diversification Opportunities for Aveng and Rex Trueform

0.59

Correlation Coefficient

Aveng  Rex Trueform

Very weak diversification

The 3 months correlation between Aveng and Rex is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and Rex Trueform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rex Trueform Group 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 Rex Trueform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rex Trueform Group has no effect on the direction of Aveng i.e., Aveng and Rex Trueform go up and down completely randomly.

Pair Corralation between Aveng and Rex Trueform

Assuming the 90 days trading horizon Aveng is expected to generate 64.65 times more return on investment than Rex Trueform. However, Aveng is 64.65 times more volatile than Rex Trueform Group. It trades about 0.26 of its potential returns per unit of risk. Rex Trueform Group is currently generating about -0.07 per unit of risk. If you would invest  93,500  in Aveng on September 23, 2024 and sell it today you would earn a total of  22,300  from holding Aveng or generate 23.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Aveng  vs.  Rex Trueform Group

Aveng

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 15 (%) 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.

Rex Trueform Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rex Trueform Group 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, Rex Trueform 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 Rex Trueform

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

The idea behind Aveng and Rex Trueform Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.