Correlation Between Truworths International and Aveng

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

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

Diversification Opportunities for Truworths International and Aveng

-0.44

Correlation Coefficient

Truworths International  Aveng

Very good diversification

The 3 months correlation between Truworths and Aveng is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Truworths International and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and Truworths International 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 Truworths International 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 Truworths International i.e., Truworths International and Aveng go up and down completely randomly.

Pair Corralation between Truworths International and Aveng

Assuming the 90 days trading horizon Truworths International is expected to under-perform the Aveng. In addition to that, Truworths International is 1.16 times more volatile than Aveng. It trades about -0.17 of its total potential returns per unit of risk. Aveng is currently generating about 0.37 per unit of volatility. If you would invest  117,500  in Aveng on October 10, 2024 and sell it today you would earn a total of  11,800  from holding Aveng or generate 10.04% return on investment over 90 days.

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

Truworths International  vs.  Aveng

Truworths International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truworths International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Truworths International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aveng

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aveng are ranked lower than 19 (%) 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 Truworths International and Aveng

The main advantage of trading using opposite Truworths International and Aveng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truworths International 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 Truworths International 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.