Correlation Between Aveng and RCL Foods
Can any of the company-specific risk be diversified away by investing in both Aveng and RCL Foods 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 RCL Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aveng and RCL Foods, you can compare the effects of market volatilities on Aveng and RCL Foods 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 RCL Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aveng and RCL Foods.
Diversification Opportunities for Aveng and RCL Foods
Weak diversification
The 3 months correlation between Aveng and RCL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aveng and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods 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 RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Aveng i.e., Aveng and RCL Foods go up and down completely randomly.
Pair Corralation between Aveng and RCL Foods
Assuming the 90 days trading horizon Aveng is expected to generate 1.73 times more return on investment than RCL Foods. However, Aveng is 1.73 times more volatile than RCL Foods. It trades about 0.31 of its potential returns per unit of risk. RCL Foods is currently generating about 0.07 per unit of risk. If you would invest 104,000 in Aveng on September 5, 2024 and sell it today you would earn a total of 13,500 from holding Aveng or generate 12.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Aveng vs. RCL Foods
Performance |
| Timeline |
| Aveng |
| RCL Foods |
Aveng and RCL Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aveng and RCL Foods
The main advantage of trading using opposite Aveng and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aveng position performs unexpectedly, RCL Foods 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 RCL Foods will offset losses from the drop in RCL Foods' long position.| Aveng vs. RCL Foods | Aveng vs. Brimstone Investment | Aveng vs. Europa Metals | Aveng vs. Reinet Investments SCA |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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