Correlation Between Ava Risk and BSA

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

By analyzing existing cross correlation between Ava Risk Group and BSA, you can compare the effects of market volatilities on Ava Risk and BSA 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 Ava Risk with a short position of BSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ava Risk and BSA.

Diversification Opportunities for Ava Risk and BSA

0.64

Correlation Coefficient

Ava Risk  BSA

Poor diversification

The 3 months correlation between Ava and BSA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ava Risk Group and BSA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSA and Ava Risk 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 Ava Risk Group are associated (or correlated) with BSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSA has no effect on the direction of Ava Risk i.e., Ava Risk and BSA go up and down completely randomly.

Pair Corralation between Ava Risk and BSA

Assuming the 90 days trading horizon Ava Risk Group is expected to generate 1.29 times more return on investment than BSA. However, Ava Risk is 1.29 times more volatile than BSA. It trades about 0.17 of its potential returns per unit of risk. BSA is currently generating about 0.07 per unit of risk. If you would invest  9.50  in Ava Risk Group on September 24, 2024 and sell it today you would earn a total of  4.50  from holding Ava Risk Group or generate 47.37% return on investment over 90 days.

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

Ava Risk Group  vs.  BSA

Ava Risk Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ava Risk Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ava Risk unveiled solid returns over the last few months and may actually be approaching a breakup point.

BSA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BSA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BSA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ava Risk and BSA

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

The idea behind Ava Risk Group and BSA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.