Correlation Between AvalonBay Communities and Tres Tentos

Can any of the company-specific risk be diversified away by investing in both AvalonBay Communities and Tres Tentos 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 AvalonBay Communities and Tres Tentos into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AvalonBay Communities and Tres Tentos Agroindustrial, you can compare the effects of market volatilities on AvalonBay Communities and Tres Tentos 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 AvalonBay Communities with a short position of Tres Tentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of AvalonBay Communities and Tres Tentos.

Diversification Opportunities for AvalonBay Communities and Tres Tentos

0.8

Correlation Coefficient

AvalonBay Communities  Tres Tentos

Very poor diversification

The 3 months correlation between AvalonBay and Tres is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Tres Tentos Agroindustrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tres Tentos Agroindu and AvalonBay Communities 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 AvalonBay Communities are associated (or correlated) with Tres Tentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tres Tentos Agroindu has no effect on the direction of AvalonBay Communities i.e., AvalonBay Communities and Tres Tentos go up and down completely randomly.

Pair Corralation between AvalonBay Communities and Tres Tentos

Assuming the 90 days trading horizon AvalonBay Communities is expected to generate 0.71 times more return on investment than Tres Tentos. However, AvalonBay Communities is 1.41 times less risky than Tres Tentos. It trades about 0.01 of its potential returns per unit of risk. Tres Tentos Agroindustrial is currently generating about -0.03 per unit of risk. If you would invest  33,935  in AvalonBay Communities on September 24, 2024 and sell it today you would lose (11.00) from holding AvalonBay Communities or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AvalonBay Communities  vs.  Tres Tentos Agroindustrial

AvalonBay Communities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AvalonBay Communities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, AvalonBay Communities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tres Tentos Agroindu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tres Tentos Agroindustrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tres Tentos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AvalonBay Communities and Tres Tentos

The main advantage of trading using opposite AvalonBay Communities and Tres Tentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities position performs unexpectedly, Tres Tentos 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 Tres Tentos will offset losses from the drop in Tres Tentos' long position.

The idea behind AvalonBay Communities and Tres Tentos Agroindustrial 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.