Correlation Between Avista and EON SE

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

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

Diversification Opportunities for Avista and EON SE

-0.52

Correlation Coefficient

Avista  EON SE

Excellent diversification

The 3 months correlation between Avista and EON is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Avista and EON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON SE and Avista 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 Avista are associated (or correlated) with EON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON SE has no effect on the direction of Avista i.e., Avista and EON SE go up and down completely randomly.

Pair Corralation between Avista and EON SE

Assuming the 90 days trading horizon Avista is expected to generate 1.14 times more return on investment than EON SE. However, Avista is 1.14 times more volatile than EON SE. It trades about 0.09 of its potential returns per unit of risk. EON SE is currently generating about -0.08 per unit of risk. If you would invest  3,376  in Avista on September 1, 2024 and sell it today you would earn a total of  224.00  from holding Avista or generate 6.64% return on investment over 90 days.

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

Avista  vs.  EON SE

Avista

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avista are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Avista may actually be approaching a critical reversion point that can send shares even higher in December 2024.

EON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, EON SE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avista and EON SE

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

The idea behind Avista and EON SE 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.