Correlation Between Avoca LLC and Evonik Industries

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

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

Diversification Opportunities for Avoca LLC and Evonik Industries

0.44

Correlation Coefficient

Avoca LLC  Evonik Industries

Very weak diversification

The 3 months correlation between Avoca and Evonik is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Avoca LLC and Evonik Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evonik Industries and Avoca LLC 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 Avoca LLC are associated (or correlated) with Evonik Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evonik Industries has no effect on the direction of Avoca LLC i.e., Avoca LLC and Evonik Industries go up and down completely randomly.

Pair Corralation between Avoca LLC and Evonik Industries

Given the investment horizon of 90 days Avoca LLC is expected to generate 1.37 times more return on investment than Evonik Industries. However, Avoca LLC is 1.37 times more volatile than Evonik Industries AG. It trades about 0.15 of its potential returns per unit of risk. Evonik Industries AG is currently generating about -0.01 per unit of risk. If you would invest  105,000  in Avoca LLC on October 27, 2024 and sell it today you would earn a total of  10,000  from holding Avoca LLC or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Avoca LLC  vs.  Evonik Industries AG

Avoca LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avoca LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Avoca LLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Evonik Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evonik Industries AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward 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 Avoca LLC and Evonik Industries

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

The idea behind Avoca LLC and Evonik Industries AG 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.