Correlation Between Avista and RWE AG
Can any of the company-specific risk be diversified away by investing in both Avista and RWE AG 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 Avista and RWE AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avista and RWE AG, you can compare the effects of market volatilities on Avista and RWE AG 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 Avista with a short position of RWE AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avista and RWE AG.
Diversification Opportunities for Avista and RWE AG
Good diversification
The 3 months correlation between Avista and RWE is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Avista and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG and Avista 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 Avista are associated (or correlated) with RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of Avista i.e., Avista and RWE AG go up and down completely randomly.
Pair Corralation between Avista and RWE AG
Assuming the 90 days trading horizon Avista is expected to generate 0.99 times more return on investment than RWE AG. However, Avista is 1.01 times less risky than RWE AG. It trades about 0.01 of its potential returns per unit of risk. RWE AG is currently generating about -0.03 per unit of risk. If you would invest 3,510 in Avista on September 12, 2024 and sell it today you would lose (10.00) from holding Avista or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Avista vs. RWE AG
Performance |
| Timeline |
| Avista |
| RWE AG |
Avista and RWE AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avista and RWE AG
The main advantage of trading using opposite Avista and RWE AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avista position performs unexpectedly, RWE AG 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 RWE AG will offset losses from the drop in RWE AG's long position.The idea behind Avista and RWE AG 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.| RWE AG vs. X FAB Silicon Foundries | RWE AG vs. InPlay Oil Corp | RWE AG vs. TRAVEL LEISURE DL 01 | RWE AG vs. Check Point Software |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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