Correlation Between Avalanche and CET

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Can any of the company-specific risk be diversified away by investing in both Avalanche and CET 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 CET into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avalanche and CET, you can compare the effects of market volatilities on Avalanche and CET 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 CET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and CET.

Diversification Opportunities for Avalanche and CET

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Avalanche and CET is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and CET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CET 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 CET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CET has no effect on the direction of Avalanche i.e., Avalanche and CET go up and down completely randomly.

Pair Corralation between Avalanche and CET

Assuming the 90 days trading horizon Avalanche is expected to generate 2.18 times more return on investment than CET. However, Avalanche is 2.18 times more volatile than CET. It trades about 0.21 of its potential returns per unit of risk. CET is currently generating about 0.28 per unit of risk. If you would invest  4,038  in Avalanche on December 29, 2023 and sell it today you would earn a total of  1,379  from holding Avalanche or generate 34.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Avalanche  vs.  CET

 Performance 
       Timeline  
Avalanche 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.
CET 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CET are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CET exhibited solid returns over the last few months and may actually be approaching a breakup point.

Avalanche and CET Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avalanche and CET

The main advantage of trading using opposite Avalanche and CET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, CET 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 CET will offset losses from the drop in CET's long position.
The idea behind Avalanche and CET 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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