Correlation Between Avoca LLC and Arkema SA
Can any of the company-specific risk be diversified away by investing in both Avoca LLC and Arkema SA 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 Avoca LLC and Arkema SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avoca LLC and Arkema SA, you can compare the effects of market volatilities on Avoca LLC and Arkema SA 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 Avoca LLC with a short position of Arkema SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avoca LLC and Arkema SA.
Diversification Opportunities for Avoca LLC and Arkema SA
Weak diversification
The 3 months correlation between Avoca and Arkema is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Avoca LLC and Arkema SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkema SA and Avoca LLC 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 Avoca LLC are associated (or correlated) with Arkema SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkema SA has no effect on the direction of Avoca LLC i.e., Avoca LLC and Arkema SA go up and down completely randomly.
Pair Corralation between Avoca LLC and Arkema SA
Given the investment horizon of 90 days Avoca LLC is expected to generate 3.48 times more return on investment than Arkema SA. However, Avoca LLC is 3.48 times more volatile than Arkema SA. It trades about 0.03 of its potential returns per unit of risk. Arkema SA is currently generating about 0.01 per unit of risk. If you would invest 120,000 in Avoca LLC on August 28, 2024 and sell it today you would earn a total of 7,500 from holding Avoca LLC or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 63.64% |
| Values | Daily Returns |
Avoca LLC vs. Arkema SA
Performance |
| Timeline |
| Avoca LLC |
| Arkema SA |
Avoca LLC and Arkema SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avoca LLC and Arkema SA
The main advantage of trading using opposite Avoca LLC and Arkema SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avoca LLC position performs unexpectedly, Arkema SA 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 Arkema SA will offset losses from the drop in Arkema SA's long position.| Avoca LLC vs. Petroleo Brasileiro Petrobras | Avoca LLC vs. Equinor ASA ADR | Avoca LLC vs. Eni SpA ADR | Avoca LLC vs. YPF Sociedad Anonima |
| Arkema SA vs. First Graphene | Arkema SA vs. HUMANA INC | Arkema SA vs. Aquagold International | Arkema SA vs. Barloworld Ltd ADR |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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