Correlation Between Avision and KYE Systems

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

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

Diversification Opportunities for Avision and KYE Systems

-0.16

Correlation Coefficient

Avision  KYE Systems

Good diversification

The 3 months correlation between Avision and KYE is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Avision and KYE Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KYE Systems Corp and Avision 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 Avision are associated (or correlated) with KYE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KYE Systems Corp has no effect on the direction of Avision i.e., Avision and KYE Systems go up and down completely randomly.

Pair Corralation between Avision and KYE Systems

Assuming the 90 days trading horizon Avision is expected to under-perform the KYE Systems. But the stock apears to be less risky and, when comparing its historical volatility, Avision is 1.66 times less risky than KYE Systems. The stock trades about -0.07 of its potential returns per unit of risk. The KYE Systems Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,008  in KYE Systems Corp on December 3, 2024 and sell it today you would earn a total of  3,702  from holding KYE Systems Corp or generate 367.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Avision  vs.  KYE Systems Corp

Avision

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Avision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

KYE Systems Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KYE Systems Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, KYE Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avision and KYE Systems

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

The idea behind Avision and KYE Systems Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.