Correlation Between Avax SA and Lanakam SA

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

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

Diversification Opportunities for Avax SA and Lanakam SA

-0.25

Correlation Coefficient

Avax SA  Lanakam SA

Very good diversification

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

Pair Corralation between Avax SA and Lanakam SA

Assuming the 90 days trading horizon Avax SA is expected to generate 0.71 times more return on investment than Lanakam SA. However, Avax SA is 1.42 times less risky than Lanakam SA. It trades about 0.23 of its potential returns per unit of risk. Lanakam SA is currently generating about 0.04 per unit of risk. If you would invest  153.00  in Avax SA on December 30, 2024 and sell it today you would earn a total of  65.00  from holding Avax SA or generate 42.48% return on investment over 90 days.

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

Avax SA  vs.  Lanakam SA

Avax SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avax SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Avax SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lanakam SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lanakam SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Lanakam SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Avax SA and Lanakam SA

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

The idea behind Avax SA and Lanakam SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.