Correlation Between Allegheny Technologies and Avadel Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Allegheny Technologies and Avadel Pharmaceuticals 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 Allegheny Technologies and Avadel Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegheny Technologies Incorporated and Avadel Pharmaceuticals PLC, you can compare the effects of market volatilities on Allegheny Technologies and Avadel Pharmaceuticals 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 Allegheny Technologies with a short position of Avadel Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegheny Technologies and Avadel Pharmaceuticals.
Diversification Opportunities for Allegheny Technologies and Avadel Pharmaceuticals
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Allegheny and Avadel is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Allegheny Technologies Incorpo and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and Allegheny Technologies 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 Allegheny Technologies Incorporated are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Allegheny Technologies i.e., Allegheny Technologies and Avadel Pharmaceuticals go up and down completely randomly.
Pair Corralation between Allegheny Technologies and Avadel Pharmaceuticals
Considering the 90-day investment horizon Allegheny Technologies Incorporated is expected to generate 0.66 times more return on investment than Avadel Pharmaceuticals. However, Allegheny Technologies Incorporated is 1.53 times less risky than Avadel Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Avadel Pharmaceuticals PLC is currently generating about -0.01 per unit of risk. If you would invest 3,950 in Allegheny Technologies Incorporated on August 31, 2024 and sell it today you would earn a total of 2,067 from holding Allegheny Technologies Incorporated or generate 52.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegheny Technologies Incorpo vs. Avadel Pharmaceuticals PLC
Performance |
| Timeline |
| Allegheny Technologies |
| Avadel Pharmaceuticals |
Allegheny Technologies and Avadel Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegheny Technologies and Avadel Pharmaceuticals
The main advantage of trading using opposite Allegheny Technologies and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegheny Technologies position performs unexpectedly, Avadel Pharmaceuticals 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 Avadel Pharmaceuticals will offset losses from the drop in Avadel Pharmaceuticals' long position.| Allegheny Technologies vs. Worthington Industries | Allegheny Technologies vs. ESAB Corp | Allegheny Technologies vs. Insteel Industries | Allegheny Technologies vs. Northwest Pipe |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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