Correlation Between Pine Cliff and Avanti Energy

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

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

Diversification Opportunities for Pine Cliff and Avanti Energy

0.34

Correlation Coefficient

Pine Cliff  Avanti Energy

Weak diversification

The 3 months correlation between Pine and Avanti is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pine Cliff Energy and Avanti Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanti Energy and Pine Cliff 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 Pine Cliff Energy are associated (or correlated) with Avanti Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanti Energy has no effect on the direction of Pine Cliff i.e., Pine Cliff and Avanti Energy go up and down completely randomly.

Pair Corralation between Pine Cliff and Avanti Energy

Assuming the 90 days trading horizon Pine Cliff is expected to generate 2.2 times less return on investment than Avanti Energy. But when comparing it to its historical volatility, Pine Cliff Energy is 3.1 times less risky than Avanti Energy. It trades about 0.27 of its potential returns per unit of risk. Avanti Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Avanti Energy on October 22, 2024 and sell it today you would earn a total of  2.50  from holding Avanti Energy or generate 29.41% return on investment over 90 days.

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

Pine Cliff Energy  vs.  Avanti Energy

Pine Cliff Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pine Cliff Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Pine Cliff is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Avanti Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanti Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Pine Cliff and Avanti Energy

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

The idea behind Pine Cliff Energy and Avanti Energy 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.