Correlation Between Avista and Atco
Can any of the company-specific risk be diversified away by investing in both Avista and Atco 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 Atco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avista and Atco, you can compare the effects of market volatilities on Avista and Atco 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 Atco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avista and Atco.
Diversification Opportunities for Avista and Atco
Good diversification
The 3 months correlation between Avista and Atco is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Avista and Atco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atco 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 Atco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atco has no effect on the direction of Avista i.e., Avista and Atco go up and down completely randomly.
Pair Corralation between Avista and Atco
Considering the 90-day investment horizon Avista is expected to generate 5.62 times less return on investment than Atco. But when comparing it to its historical volatility, Avista is 1.52 times less risky than Atco. It trades about 0.01 of its potential returns per unit of risk. Atco is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,876 in Atco on August 24, 2024 and sell it today you would earn a total of 655.00 from holding Atco or generate 22.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.18% |
| Values | Daily Returns |
Avista vs. Atco
Performance |
| Timeline |
| Avista |
| Atco |
Avista and Atco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avista and Atco
The main advantage of trading using opposite Avista and Atco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avista position performs unexpectedly, Atco 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 Atco will offset losses from the drop in Atco's long position.| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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