Correlation Between Avalon Advanced and Ascendant Resources

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

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

Diversification Opportunities for Avalon Advanced and Ascendant Resources

0.28

Correlation Coefficient

Avalon Advanced  Ascendant Resources

Modest diversification

The 3 months correlation between Avalon and Ascendant is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Avalon Advanced Materials and Ascendant Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascendant Resources and Avalon Advanced 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 Avalon Advanced Materials are associated (or correlated) with Ascendant Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascendant Resources has no effect on the direction of Avalon Advanced i.e., Avalon Advanced and Ascendant Resources go up and down completely randomly.

Pair Corralation between Avalon Advanced and Ascendant Resources

Assuming the 90 days trading horizon Avalon Advanced Materials is expected to generate 0.87 times more return on investment than Ascendant Resources. However, Avalon Advanced Materials is 1.15 times less risky than Ascendant Resources. It trades about 0.0 of its potential returns per unit of risk. Ascendant Resources is currently generating about -0.02 per unit of risk. If you would invest  17.00  in Avalon Advanced Materials on January 26, 2024 and sell it today you would lose (9.50) from holding Avalon Advanced Materials or give up 55.88% of portfolio value over 90 days.

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

Avalon Advanced Materials  vs.  Ascendant Resources

Avalon Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avalon Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ascendant Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascendant Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Avalon Advanced and Ascendant Resources

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

The idea behind Avalon Advanced Materials and Ascendant Resources 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.