Correlation Between Avadel Pharmaceuticals and Zeo Energy

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

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

Diversification Opportunities for Avadel Pharmaceuticals and Zeo Energy

-0.47

Correlation Coefficient

Avadel Pharmaceuticals  Zeo Energy

Very good diversification

The 3 months correlation between Avadel and Zeo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Avadel Pharmaceuticals PLC and Zeo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeo Energy Corp and Avadel Pharmaceuticals 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 Avadel Pharmaceuticals PLC are associated (or correlated) with Zeo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeo Energy Corp has no effect on the direction of Avadel Pharmaceuticals i.e., Avadel Pharmaceuticals and Zeo Energy go up and down completely randomly.

Pair Corralation between Avadel Pharmaceuticals and Zeo Energy

Given the investment horizon of 90 days Avadel Pharmaceuticals PLC is expected to under-perform the Zeo Energy. But the stock apears to be less risky and, when comparing its historical volatility, Avadel Pharmaceuticals PLC is 5.22 times less risky than Zeo Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Zeo Energy Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4.66  in Zeo Energy Corp on December 18, 2024 and sell it today you would earn a total of  3.82  from holding Zeo Energy Corp or generate 81.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	77.97%
Values	Daily Returns

Avadel Pharmaceuticals PLC  vs.  Zeo Energy Corp

Avadel Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avadel Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Zeo Energy Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zeo Energy Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Zeo Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avadel Pharmaceuticals and Zeo Energy

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

The idea behind Avadel Pharmaceuticals PLC and Zeo Energy Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.