Correlation Between Avalanche and JOE
Can any of the company-specific risk be diversified away by investing in both Avalanche and JOE 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 Avalanche and JOE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avalanche and JOE, you can compare the effects of market volatilities on Avalanche and JOE 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 Avalanche with a short position of JOE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and JOE.
Diversification Opportunities for Avalanche and JOE
Almost no diversification
The 3 months correlation between Avalanche and JOE is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and JOE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOE and Avalanche 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 Avalanche are associated (or correlated) with JOE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JOE has no effect on the direction of Avalanche i.e., Avalanche and JOE go up and down completely randomly.
Pair Corralation between Avalanche and JOE
Assuming the 90 days trading horizon Avalanche is expected to generate 1.55 times more return on investment than JOE. However, Avalanche is 1.55 times more volatile than JOE. It trades about 0.07 of its potential returns per unit of risk. JOE is currently generating about 0.09 per unit of risk. If you would invest 1,348 in Avalanche on August 30, 2024 and sell it today you would earn a total of 3,002 from holding Avalanche or generate 222.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avalanche vs. JOE
Performance |
| Timeline |
| Avalanche |
| JOE |
Avalanche and JOE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avalanche and JOE
The main advantage of trading using opposite Avalanche and JOE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, JOE 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 JOE will offset losses from the drop in JOE's long position.The idea behind Avalanche and JOE 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.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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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