Correlation Between Avista and AltaGas

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

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

Diversification Opportunities for Avista and AltaGas

0.63

Correlation Coefficient

Avista  AltaGas

Poor diversification

The 3 months correlation between Avista and AltaGas is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Avista and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas and Avista 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 Avista are associated (or correlated) with AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Avista i.e., Avista and AltaGas go up and down completely randomly.

Pair Corralation between Avista and AltaGas

Considering the 90-day investment horizon Avista is expected to generate 0.97 times more return on investment than AltaGas. However, Avista is 1.03 times less risky than AltaGas. It trades about -0.05 of its potential returns per unit of risk. AltaGas is currently generating about -0.08 per unit of risk. If you would invest  3,825  in Avista on September 27, 2024 and sell it today you would lose (159.00) from holding Avista or give up 4.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Avista  vs.  AltaGas

Avista

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avista has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Avista is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AltaGas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AltaGas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, AltaGas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Avista and AltaGas

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

The idea behind Avista and AltaGas 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.