Correlation Between Aveng and DRA Global
Can any of the company-specific risk be diversified away by investing in both Aveng and DRA Global 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 Aveng and DRA Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aveng and DRA Global, you can compare the effects of market volatilities on Aveng and DRA Global 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 Aveng with a short position of DRA Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aveng and DRA Global.
Diversification Opportunities for Aveng and DRA Global
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aveng and DRA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and DRA Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRA Global and Aveng 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 Aveng are associated (or correlated) with DRA Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRA Global has no effect on the direction of Aveng i.e., Aveng and DRA Global go up and down completely randomly.
Pair Corralation between Aveng and DRA Global
Assuming the 90 days trading horizon Aveng is expected to generate 0.72 times more return on investment than DRA Global. However, Aveng is 1.38 times less risky than DRA Global. It trades about 0.12 of its potential returns per unit of risk. DRA Global is currently generating about -0.03 per unit of risk. If you would invest 97,500 in Aveng on September 3, 2024 and sell it today you would earn a total of 14,400 from holding Aveng or generate 14.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aveng vs. DRA Global
Performance |
| Timeline |
| Aveng |
| DRA Global |
Aveng and DRA Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aveng and DRA Global
The main advantage of trading using opposite Aveng and DRA Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aveng position performs unexpectedly, DRA Global 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 DRA Global will offset losses from the drop in DRA Global's long position.The idea behind Aveng and DRA Global 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.| DRA Global vs. Frontier Transport Holdings | DRA Global vs. Reinet Investments SCA | DRA Global vs. Brimstone Investment | DRA Global vs. City Lodge Hotels |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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