Correlation Between AES and Avista
Can any of the company-specific risk be diversified away by investing in both AES and Avista 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 AES and Avista into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Avista, you can compare the effects of market volatilities on AES and Avista 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 AES with a short position of Avista. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Avista.
Diversification Opportunities for AES and Avista
Modest diversification
The 3 months correlation between AES and Avista is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Avista in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avista and AES 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 The AES are associated (or correlated) with Avista. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avista has no effect on the direction of AES i.e., AES and Avista go up and down completely randomly.
Pair Corralation between AES and Avista
Considering the 90-day investment horizon The AES is expected to under-perform the Avista. In addition to that, AES is 2.5 times more volatile than Avista. It trades about -0.33 of its total potential returns per unit of risk. Avista is currently generating about 0.1 per unit of volatility. If you would invest 3,819 in Avista on August 27, 2024 and sell it today you would earn a total of 104.00 from holding Avista or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The AES vs. Avista
Performance |
| Timeline |
| AES |
| Avista |
AES and Avista Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Avista
The main advantage of trading using opposite AES and Avista positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Avista 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 Avista will offset losses from the drop in Avista's long position.The idea behind The AES and Avista 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.| Avista vs. Allete Inc | Avista vs. Black Hills | Avista vs. Montauk Renewables | Avista vs. Companhia Paranaense de |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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