Correlation Between Avantis Core and Avantis Responsible

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

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

Diversification Opportunities for Avantis Core and Avantis Responsible

-0.23

Correlation Coefficient

Avantis Core  Avantis Responsible

Very good diversification

The 3 months correlation between Avantis and Avantis is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Core Municipal and Avantis Responsible Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Responsible and Avantis Core 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 Avantis Core Municipal are associated (or correlated) with Avantis Responsible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Responsible has no effect on the direction of Avantis Core i.e., Avantis Core and Avantis Responsible go up and down completely randomly.

Pair Corralation between Avantis Core and Avantis Responsible

Given the investment horizon of 90 days Avantis Core is expected to generate 9.93 times less return on investment than Avantis Responsible. But when comparing it to its historical volatility, Avantis Core Municipal is 4.05 times less risky than Avantis Responsible. It trades about 0.01 of its potential returns per unit of risk. Avantis Responsible Emerging is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,239  in Avantis Responsible Emerging on September 14, 2024 and sell it today you would earn a total of  81.82  from holding Avantis Responsible Emerging or generate 1.56% return on investment over 90 days.

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

Avantis Core Municipal  vs.  Avantis Responsible Emerging

Avantis Core Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Core Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Avantis Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Avantis Responsible

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Responsible Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Avantis Responsible is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avantis Core and Avantis Responsible

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

The idea behind Avantis Core Municipal and Avantis Responsible Emerging 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.