Correlation Between Yangarra Resources and Avanti Energy

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

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

Diversification Opportunities for Yangarra Resources and Avanti Energy

0.33

Correlation Coefficient

Yangarra Resources  Avanti Energy

Weak diversification

The 3 months correlation between Yangarra and Avanti is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Yangarra Resources and Avanti Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanti Energy and Yangarra Resources 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 Yangarra Resources 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 Yangarra Resources i.e., Yangarra Resources and Avanti Energy go up and down completely randomly.

Pair Corralation between Yangarra Resources and Avanti Energy

Assuming the 90 days horizon Yangarra Resources is expected to under-perform the Avanti Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Yangarra Resources is 3.43 times less risky than Avanti Energy. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Avanti Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8.60  in Avanti Energy on November 29, 2024 and sell it today you would lose (1.10) from holding Avanti Energy or give up 12.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Yangarra Resources  vs.  Avanti Energy

Yangarra Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yangarra Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yangarra Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Avanti Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avanti Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Avanti Energy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Yangarra Resources and Avanti Energy

The main advantage of trading using opposite Yangarra Resources and Avanti Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yangarra Resources 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 Yangarra Resources 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.

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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.