Correlation Between Avista and Power Assets

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

By analyzing existing cross correlation between Avista and Power Assets Holdings, you can compare the effects of market volatilities on Avista and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avista and Power Assets.

Diversification Opportunities for Avista and Power Assets

0.06

Correlation Coefficient

Avista  Power Assets

Significant diversification

The 3 months correlation between Avista and Power is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Avista and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of Avista i.e., Avista and Power Assets go up and down completely randomly.

Pair Corralation between Avista and Power Assets

Considering the 90-day investment horizon Avista is expected to under-perform the Power Assets. But the stock apears to be less risky and, when comparing its historical volatility, Avista is 1.22 times less risky than Power Assets. The stock trades about -0.08 of its potential returns per unit of risk. The Power Assets Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  682.00  in Power Assets Holdings on September 22, 2024 and sell it today you would lose (16.00) from holding Power Assets Holdings or give up 2.35% of portfolio value over 90 days.

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

Avista  vs.  Power Assets Holdings

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.

Power Assets Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Assets Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Power Assets is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avista and Power Assets

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

The idea behind Avista and Power Assets Holdings 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.