Correlation Between Mairs Power and Avantis Equity

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

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

Diversification Opportunities for Mairs Power and Avantis Equity

0.82

Correlation Coefficient

Mairs Power  Avantis Equity

Very poor diversification

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

Pair Corralation between Mairs Power and Avantis Equity

Assuming the 90 days horizon Mairs Power Growth is expected to under-perform the Avantis Equity. In addition to that, Mairs Power is 1.13 times more volatile than Avantis Equity. It trades about -0.27 of its total potential returns per unit of risk. Avantis Equity is currently generating about -0.13 per unit of volatility. If you would invest  1,912  in Avantis Equity on October 11, 2024 and sell it today you would lose (50.00) from holding Avantis Equity or give up 2.62% of portfolio value over 90 days.

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

Mairs Power Growth  vs.  Avantis Equity

Mairs Power Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mairs Power Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Mairs Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avantis Equity

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Equity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Avantis Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mairs Power and Avantis Equity

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

The idea behind Mairs Power Growth and Avantis Equity 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.