Correlation Between Avalanche and SNET
Can any of the company-specific risk be diversified away by investing in both Avalanche and SNET 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 SNET into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avalanche and SNET, you can compare the effects of market volatilities on Avalanche and SNET 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 SNET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and SNET.
Diversification Opportunities for Avalanche and SNET
Very good diversification
The 3 months correlation between Avalanche and SNET is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and SNET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNET 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 SNET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNET has no effect on the direction of Avalanche i.e., Avalanche and SNET go up and down completely randomly.
Pair Corralation between Avalanche and SNET
Assuming the 90 days trading horizon Avalanche is expected to generate 6.14 times less return on investment than SNET. But when comparing it to its historical volatility, Avalanche is 4.61 times less risky than SNET. It trades about 0.07 of its potential returns per unit of risk. SNET is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.12 in SNET on August 30, 2024 and sell it today you would earn a total of 0.06 from holding SNET or generate 50.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avalanche vs. SNET
Performance |
| Timeline |
| Avalanche |
| SNET |
Avalanche and SNET Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avalanche and SNET
The main advantage of trading using opposite Avalanche and SNET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, SNET 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 SNET will offset losses from the drop in SNET's long position.The idea behind Avalanche and SNET 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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