Correlation Between DRA Global and Aveng

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

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

Diversification Opportunities for DRA Global and Aveng

-0.28

Correlation Coefficient

DRA Global  Aveng

Very good diversification

The 3 months correlation between DRA and Aveng is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding DRA Global and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and DRA Global 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 DRA Global are associated (or correlated) with Aveng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveng has no effect on the direction of DRA Global i.e., DRA Global and Aveng go up and down completely randomly.

Pair Corralation between DRA Global and Aveng

Assuming the 90 days trading horizon DRA Global is expected to generate 1.11 times more return on investment than Aveng. However, DRA Global is 1.11 times more volatile than Aveng. It trades about 0.02 of its potential returns per unit of risk. Aveng is currently generating about 0.0 per unit of risk. If you would invest  200,100  in DRA Global on September 23, 2024 and sell it today you would earn a total of  20,000  from holding DRA Global or generate 10.0% return on investment over 90 days.

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

DRA Global  vs.  Aveng

DRA Global

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DRA Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, DRA Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aveng

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Aveng exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRA Global and Aveng

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

The idea behind DRA Global and Aveng 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.