Correlation Between Enhanced and Avantis Us

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

By analyzing existing cross correlation between Enhanced Large Pany and Avantis Large Cap, you can compare the effects of market volatilities on Enhanced and Avantis Us 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 Enhanced with a short position of Avantis Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced and Avantis Us.

Diversification Opportunities for Enhanced and Avantis Us

0.82

Correlation Coefficient

Enhanced  Avantis Us

Very poor diversification

The 3 months correlation between Enhanced and Avantis is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Avantis Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Large Cap and Enhanced 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 Enhanced Large Pany are associated (or correlated) with Avantis Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Large Cap has no effect on the direction of Enhanced i.e., Enhanced and Avantis Us go up and down completely randomly.

Pair Corralation between Enhanced and Avantis Us

Assuming the 90 days horizon Enhanced is expected to generate 1.37 times less return on investment than Avantis Us. But when comparing it to its historical volatility, Enhanced Large Pany is 1.02 times less risky than Avantis Us. It trades about 0.07 of its potential returns per unit of risk. Avantis Large Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,409  in Avantis Large Cap on October 23, 2024 and sell it today you would earn a total of  67.00  from holding Avantis Large Cap or generate 4.76% return on investment over 90 days.

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

Enhanced Large Pany  vs.  Avantis Large Cap

Enhanced Large Pany

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Large Pany are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avantis Large Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Large Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Avantis Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enhanced and Avantis Us

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

The idea behind Enhanced Large Pany and Avantis Large Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.