Correlation Between Avanti Energy and CGX Energy

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

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

Diversification Opportunities for Avanti Energy and CGX Energy

-0.13

Correlation Coefficient

Avanti Energy  CGX Energy

Good diversification

The 3 months correlation between Avanti and CGX is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Avanti Energy and CGX Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGX Energy and Avanti Energy 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 Avanti Energy are associated (or correlated) with CGX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGX Energy has no effect on the direction of Avanti Energy i.e., Avanti Energy and CGX Energy go up and down completely randomly.

Pair Corralation between Avanti Energy and CGX Energy

Assuming the 90 days horizon Avanti Energy is expected to generate 1.2 times more return on investment than CGX Energy. However, Avanti Energy is 1.2 times more volatile than CGX Energy. It trades about 0.13 of its potential returns per unit of risk. CGX Energy is currently generating about 0.01 per unit of risk. If you would invest  5.90  in Avanti Energy on December 27, 2024 and sell it today you would earn a total of  3.96  from holding Avanti Energy or generate 67.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Avanti Energy  vs.  CGX Energy

Avanti Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avanti Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Avanti Energy reported solid returns over the last few months and may actually be approaching a breakup point.

CGX Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CGX Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, CGX Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Avanti Energy and CGX Energy

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

The idea behind Avanti Energy and CGX Energy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.