Correlation Between Cabot and Avient Corp
Can any of the company-specific risk be diversified away by investing in both Cabot and Avient Corp 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 Cabot and Avient Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cabot and Avient Corp, you can compare the effects of market volatilities on Cabot and Avient Corp 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 Cabot with a short position of Avient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabot and Avient Corp.
Diversification Opportunities for Cabot and Avient Corp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cabot and Avient is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cabot and Avient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avient Corp and Cabot 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 Cabot are associated (or correlated) with Avient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avient Corp has no effect on the direction of Cabot i.e., Cabot and Avient Corp go up and down completely randomly.
Pair Corralation between Cabot and Avient Corp
Considering the 90-day investment horizon Cabot is expected to generate 1.04 times less return on investment than Avient Corp. But when comparing it to its historical volatility, Cabot is 1.01 times less risky than Avient Corp. It trades about 0.06 of its potential returns per unit of risk. Avient Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,204 in Avient Corp on August 27, 2024 and sell it today you would earn a total of 2,024 from holding Avient Corp or generate 63.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabot vs. Avient Corp
Performance |
| Timeline |
| Cabot |
| Avient Corp |
Cabot and Avient Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabot and Avient Corp
The main advantage of trading using opposite Cabot and Avient Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabot position performs unexpectedly, Avient Corp 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 Avient Corp will offset losses from the drop in Avient Corp's long position.The idea behind Cabot and Avient Corp 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.| Avient Corp vs. Axalta Coating Systems | Avient Corp vs. H B Fuller | Avient Corp vs. Quaker Chemical | Avient Corp vs. Cabot |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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