Correlation Between TORM Plc and Avance Gas

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

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

Diversification Opportunities for TORM Plc and Avance Gas

0.84

Correlation Coefficient

TORM Plc  Avance Gas

Very poor diversification

The 3 months correlation between TORM and Avance is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding TORM plc and Avance Gas Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avance Gas Holding and TORM Plc 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 TORM plc are associated (or correlated) with Avance Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avance Gas Holding has no effect on the direction of TORM Plc i.e., TORM Plc and Avance Gas go up and down completely randomly.

Pair Corralation between TORM Plc and Avance Gas

Assuming the 90 days trading horizon TORM plc is expected to generate 0.55 times more return on investment than Avance Gas. However, TORM plc is 1.82 times less risky than Avance Gas. It trades about -0.06 of its potential returns per unit of risk. Avance Gas Holding is currently generating about -0.09 per unit of risk. If you would invest  13,407  in TORM plc on December 30, 2024 and sell it today you would lose (1,887) from holding TORM plc or give up 14.07% of portfolio value over 90 days.

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

TORM plc  vs.  Avance Gas Holding

TORM plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days TORM plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Avance Gas Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avance Gas Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with TORM Plc and Avance Gas

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

The idea behind TORM plc and Avance Gas Holding 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 Stocks Directory module to find actively traded stocks across global markets.