Correlation Between Avalanche and Celo

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

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

Diversification Opportunities for Avalanche and Celo

0.65

Correlation Coefficient

Avalanche  Celo

Poor diversification

The 3 months correlation between Avalanche and Celo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Celo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celo and Avalanche 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 Avalanche are associated (or correlated) with Celo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celo has no effect on the direction of Avalanche i.e., Avalanche and Celo go up and down completely randomly.

Pair Corralation between Avalanche and Celo

Assuming the 90 days trading horizon Avalanche is expected to generate 0.98 times more return on investment than Celo. However, Avalanche is 1.02 times less risky than Celo. It trades about 0.27 of its potential returns per unit of risk. Celo is currently generating about 0.23 per unit of risk. If you would invest  2,191  in Avalanche on September 3, 2024 and sell it today you would earn a total of  3,001  from holding Avalanche or generate 136.97% return on investment over 90 days.

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

Avalanche  vs.  Celo

Avalanche

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.

Celo

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Celo are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Celo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avalanche and Celo

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

The idea behind Avalanche and Celo 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.