Correlation Between AES and Avista

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

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

Diversification Opportunities for AES and Avista

0.25

Correlation Coefficient

AES  Avista

Modest diversification

The 3 months correlation between AES and Avista is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Avista in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avista and AES 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 The AES are associated (or correlated) with Avista. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avista has no effect on the direction of AES i.e., AES and Avista go up and down completely randomly.

Pair Corralation between AES and Avista

Considering the 90-day investment horizon AES is expected to generate 7.84 times less return on investment than Avista. In addition to that, AES is 2.01 times more volatile than Avista. It trades about 0.01 of its total potential returns per unit of risk. Avista is currently generating about 0.13 per unit of volatility. If you would invest  3,607  in Avista on December 27, 2024 and sell it today you would earn a total of  397.00  from holding Avista or generate 11.01% return on investment over 90 days.

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

The AES  vs.  Avista

AES

Risk-Adjusted Performance

Very Weak

Over the last 90 days The AES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, AES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Avista

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avista are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avista may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AES and Avista

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

The idea behind The AES and Avista 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.