Correlation Between Genel Energy and Aviat Networks

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

By analyzing existing cross correlation between Genel Energy plc and Aviat Networks, you can compare the effects of market volatilities on Genel Energy and Aviat Networks 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 Genel Energy with a short position of Aviat Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genel Energy and Aviat Networks.

Diversification Opportunities for Genel Energy and Aviat Networks

0.51

Correlation Coefficient

Genel Energy  Aviat Networks

Very weak diversification

The 3 months correlation between Genel and Aviat is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Genel Energy plc and Aviat Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviat Networks and Genel Energy 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 Genel Energy plc are associated (or correlated) with Aviat Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviat Networks has no effect on the direction of Genel Energy i.e., Genel Energy and Aviat Networks go up and down completely randomly.

Pair Corralation between Genel Energy and Aviat Networks

Assuming the 90 days horizon Genel Energy plc is expected to under-perform the Aviat Networks. In addition to that, Genel Energy is 1.5 times more volatile than Aviat Networks. It trades about -0.22 of its total potential returns per unit of risk. Aviat Networks is currently generating about -0.3 per unit of volatility. If you would invest  2,718  in Aviat Networks on June 29, 2024 and sell it today you would lose (565.00) from holding Aviat Networks or give up 20.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Genel Energy plc  vs.  Aviat Networks

Genel Energy plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genel Energy plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aviat Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aviat Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in October 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Genel Energy and Aviat Networks

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

The idea behind Genel Energy plc and Aviat Networks 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.