Correlation Between Australian Strategic and Ava Risk

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

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

Diversification Opportunities for Australian Strategic and Ava Risk

-0.1

Correlation Coefficient

Australian Strategic  Ava Risk

Good diversification

The 3 months correlation between Australian and Ava is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Australian Strategic Materials and Ava Risk Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ava Risk Group and Australian Strategic 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 Australian Strategic Materials are associated (or correlated) with Ava Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ava Risk Group has no effect on the direction of Australian Strategic i.e., Australian Strategic and Ava Risk go up and down completely randomly.

Pair Corralation between Australian Strategic and Ava Risk

Assuming the 90 days trading horizon Australian Strategic Materials is expected to under-perform the Ava Risk. But the stock apears to be less risky and, when comparing its historical volatility, Australian Strategic Materials is 1.05 times less risky than Ava Risk. The stock trades about -0.02 of its potential returns per unit of risk. The Ava Risk Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Ava Risk Group on October 5, 2024 and sell it today you would earn a total of  1.00  from holding Ava Risk Group or generate 8.33% return on investment over 90 days.

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

Australian Strategic Materials  vs.  Ava Risk Group

Australian Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ava Risk Group

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ava Risk Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ava Risk may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Australian Strategic and Ava Risk

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

The idea behind Australian Strategic Materials and Ava Risk 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.