Correlation Between Avarone Metals and First Energy

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

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

Diversification Opportunities for Avarone Metals and First Energy

0.71

Correlation Coefficient

Avarone Metals  First Energy

Poor diversification

The 3 months correlation between Avarone and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals and First Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Energy Metals and Avarone Metals 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 Avarone Metals are associated (or correlated) with First Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Energy Metals has no effect on the direction of Avarone Metals i.e., Avarone Metals and First Energy go up and down completely randomly.

Pair Corralation between Avarone Metals and First Energy

Assuming the 90 days horizon Avarone Metals is expected to under-perform the First Energy. In addition to that, Avarone Metals is 1.19 times more volatile than First Energy Metals. It trades about -0.13 of its total potential returns per unit of risk. First Energy Metals is currently generating about -0.03 per unit of volatility. If you would invest  6.00  in First Energy Metals on September 3, 2024 and sell it today you would lose (2.00) from holding First Energy Metals or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Avarone Metals  vs.  First Energy Metals

Avarone Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avarone Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

First Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Avarone Metals and First Energy

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

The idea behind Avarone Metals and First Energy Metals 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..