Correlation Between Firstrand and Aveng

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

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

Diversification Opportunities for Firstrand and Aveng

-0.48

Correlation Coefficient

Firstrand  Aveng

Very good diversification

The 3 months correlation between Firstrand and Aveng is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Firstrand and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and Firstrand 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 Firstrand 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 Firstrand i.e., Firstrand and Aveng go up and down completely randomly.

Pair Corralation between Firstrand and Aveng

Assuming the 90 days trading horizon Firstrand is expected to generate 0.47 times more return on investment than Aveng. However, Firstrand is 2.11 times less risky than Aveng. It trades about 0.05 of its potential returns per unit of risk. Aveng is currently generating about 0.0 per unit of risk. If you would invest  553,556  in Firstrand on September 23, 2024 and sell it today you would earn a total of  217,344  from holding Firstrand or generate 39.26% return on investment over 90 days.

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

Firstrand  vs.  Aveng

Firstrand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firstrand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 Firstrand and Aveng

The main advantage of trading using opposite Firstrand and Aveng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firstrand 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 Firstrand 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.