Correlation Between AdvancedAdvT and Drax Group

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

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

Diversification Opportunities for AdvancedAdvT and Drax Group

0.8

Correlation Coefficient

AdvancedAdvT  Drax Group

Very poor diversification

The 3 months correlation between AdvancedAdvT and Drax is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding AdvancedAdvT and Drax Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drax Group PLC and AdvancedAdvT 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 AdvancedAdvT are associated (or correlated) with Drax Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drax Group PLC has no effect on the direction of AdvancedAdvT i.e., AdvancedAdvT and Drax Group go up and down completely randomly.

Pair Corralation between AdvancedAdvT and Drax Group

Assuming the 90 days trading horizon AdvancedAdvT is expected to generate 1.15 times less return on investment than Drax Group. In addition to that, AdvancedAdvT is 1.38 times more volatile than Drax Group PLC. It trades about 0.11 of its total potential returns per unit of risk. Drax Group PLC is currently generating about 0.18 per unit of volatility. If you would invest  57,536  in Drax Group PLC on March 23, 2025 and sell it today you would earn a total of  9,164  from holding Drax Group PLC or generate 15.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

AdvancedAdvT  vs.  Drax Group PLC

AdvancedAdvT

Risk-Adjusted Performance

OK

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

Drax Group PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Drax Group PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Drax Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AdvancedAdvT and Drax Group

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

The idea behind AdvancedAdvT and Drax Group PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.