Correlation Between Avient Corp and Cabot

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

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

Diversification Opportunities for Avient Corp and Cabot

0.89

Correlation Coefficient

Avient Corp  Cabot

Very poor diversification

The 3 months correlation between Avient and Cabot is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Avient Corp and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot and Avient Corp 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 Avient Corp are associated (or correlated) with Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Avient Corp i.e., Avient Corp and Cabot go up and down completely randomly.

Pair Corralation between Avient Corp and Cabot

Given the investment horizon of 90 days Avient Corp is expected to under-perform the Cabot. But the stock apears to be less risky and, when comparing its historical volatility, Avient Corp is 1.13 times less risky than Cabot. The stock trades about -0.08 of its potential returns per unit of risk. The Cabot is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,680  in Cabot on December 1, 2024 and sell it today you would lose (80.00) from holding Cabot or give up 0.92% of portfolio value over 90 days.

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

Avient Corp  vs.  Cabot

Avient Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cabot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Avient Corp and Cabot

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

The idea behind Avient Corp and Cabot 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.