Correlation Between Altura Energy and Avanti Energy

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

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

Diversification Opportunities for Altura Energy and Avanti Energy

-0.81

Correlation Coefficient

Altura Energy  Avanti Energy

Pay attention - limited upside

The 3 months correlation between Altura and Avanti is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Altura Energy and Avanti Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanti Energy and Altura 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 Altura Energy are associated (or correlated) with Avanti Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanti Energy has no effect on the direction of Altura Energy i.e., Altura Energy and Avanti Energy go up and down completely randomly.

Pair Corralation between Altura Energy and Avanti Energy

Assuming the 90 days horizon Altura Energy is expected to generate 16.05 times less return on investment than Avanti Energy. But when comparing it to its historical volatility, Altura Energy is 4.12 times less risky than Avanti Energy. It trades about 0.02 of its potential returns per unit of risk. Avanti Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Avanti Energy on October 11, 2024 and sell it today you would earn a total of  0.30  from holding Avanti Energy or generate 4.62% return on investment over 90 days.

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

Altura Energy  vs.  Avanti Energy

Altura Energy

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altura Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Altura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Avanti Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanti Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Altura Energy and Avanti Energy

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

The idea behind Altura Energy and Avanti 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.