Correlation Between AVCON Information and China International

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

By analyzing existing cross correlation between AVCON Information Tech and China International Travel, you can compare the effects of market volatilities on AVCON Information and China International 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 AVCON Information with a short position of China International. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVCON Information and China International.

Diversification Opportunities for AVCON Information and China International

0.13

Correlation Coefficient

AVCON Information  China International

Average diversification

The 3 months correlation between AVCON and China is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AVCON Information Tech and China International Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International and AVCON Information 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 AVCON Information Tech are associated (or correlated) with China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of AVCON Information i.e., AVCON Information and China International go up and down completely randomly.

Pair Corralation between AVCON Information and China International

Assuming the 90 days trading horizon AVCON Information Tech is expected to generate 3.16 times more return on investment than China International. However, AVCON Information is 3.16 times more volatile than China International Travel. It trades about 0.06 of its potential returns per unit of risk. China International Travel is currently generating about -0.14 per unit of risk. If you would invest  432.00  in AVCON Information Tech on December 24, 2024 and sell it today you would earn a total of  49.00  from holding AVCON Information Tech or generate 11.34% return on investment over 90 days.

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

AVCON Information Tech  vs.  China International Travel

AVCON Information Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AVCON Information Tech are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVCON Information sustained solid returns over the last few months and may actually be approaching a breakup point.

China International

Risk-Adjusted Performance

Very Weak

Over the last 90 days China International Travel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with AVCON Information and China International

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

The idea behind AVCON Information Tech and China International Travel 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.