Correlation Between Advent Wireless and High Liner

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

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

Diversification Opportunities for Advent Wireless and High Liner

0.89

Correlation Coefficient

Advent Wireless  High Liner

Very poor diversification

The 3 months correlation between Advent and High is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Advent Wireless and High Liner Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Liner Foods and Advent Wireless 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 Advent Wireless are associated (or correlated) with High Liner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Liner Foods has no effect on the direction of Advent Wireless i.e., Advent Wireless and High Liner go up and down completely randomly.

Pair Corralation between Advent Wireless and High Liner

Assuming the 90 days horizon Advent Wireless is expected to generate 2.4 times more return on investment than High Liner. However, Advent Wireless is 2.4 times more volatile than High Liner Foods. It trades about 0.12 of its potential returns per unit of risk. High Liner Foods is currently generating about 0.16 per unit of risk. If you would invest  65.00  in Advent Wireless on September 4, 2024 and sell it today you would earn a total of  18.00  from holding Advent Wireless or generate 27.69% return on investment over 90 days.

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

Advent Wireless  vs.  High Liner Foods

Advent Wireless

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Advent Wireless showed solid returns over the last few months and may actually be approaching a breakup point.

High Liner Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in High Liner Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, High Liner displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advent Wireless and High Liner

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

The idea behind Advent Wireless and High Liner Foods 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.