Correlation Between Avient Corp and Cool

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

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

Diversification Opportunities for Avient Corp and Cool

-0.36

Correlation Coefficient

Avient Corp  Cool

Very good diversification

The 3 months correlation between Avient and Cool is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Avient Corp and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and Avient Corp 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 Avient Corp are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of Avient Corp i.e., Avient Corp and Cool go up and down completely randomly.

Pair Corralation between Avient Corp and Cool

Given the investment horizon of 90 days Avient Corp is expected to generate 0.78 times more return on investment than Cool. However, Avient Corp is 1.28 times less risky than Cool. It trades about 0.06 of its potential returns per unit of risk. Cool Company is currently generating about -0.05 per unit of risk. If you would invest  3,862  in Avient Corp on September 12, 2024 and sell it today you would earn a total of  1,070  from holding Avient Corp or generate 27.71% return on investment over 90 days.

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

Avient Corp  vs.  Cool Company

Avient Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avient Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Avient Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cool Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Avient Corp and Cool

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

The idea behind Avient Corp and Cool Company 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.