Correlation Between Montauk Renewables and Avista

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

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

Diversification Opportunities for Montauk Renewables and Avista

0.18

Correlation Coefficient

Montauk Renewables  Avista

Average diversification

The 3 months correlation between Montauk and Avista is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Avista in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avista and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Avista. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avista has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Avista go up and down completely randomly.

Pair Corralation between Montauk Renewables and Avista

Given the investment horizon of 90 days Montauk Renewables is expected to generate 3.11 times more return on investment than Avista. However, Montauk Renewables is 3.11 times more volatile than Avista. It trades about 0.06 of its potential returns per unit of risk. Avista is currently generating about -0.04 per unit of risk. If you would invest  404.00  in Montauk Renewables on November 19, 2024 and sell it today you would earn a total of  41.00  from holding Montauk Renewables or generate 10.15% return on investment over 90 days.

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

Montauk Renewables  vs.  Avista

Montauk Renewables

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Montauk Renewables disclosed solid returns over the last few months and may actually be approaching a breakup point.

Avista

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Montauk Renewables and Avista

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

The idea behind Montauk Renewables and Avista 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.