Correlation Between AVCON Information and Healthcare

Can any of the company-specific risk be diversified away by investing in both AVCON Information and Healthcare 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 Healthcare 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 Healthcare Co, you can compare the effects of market volatilities on AVCON Information and Healthcare 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 Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVCON Information and Healthcare.

Diversification Opportunities for AVCON Information and Healthcare

0.92

Correlation Coefficient

AVCON Information  Healthcare

Almost no diversification

The 3 months correlation between AVCON and Healthcare is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding AVCON Information Tech and Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare 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 Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare has no effect on the direction of AVCON Information i.e., AVCON Information and Healthcare go up and down completely randomly.

Pair Corralation between AVCON Information and Healthcare

Assuming the 90 days trading horizon AVCON Information Tech is expected to under-perform the Healthcare. In addition to that, AVCON Information is 1.46 times more volatile than Healthcare Co. It trades about -0.09 of its total potential returns per unit of risk. Healthcare Co is currently generating about 0.1 per unit of volatility. If you would invest  681.00  in Healthcare Co on September 25, 2024 and sell it today you would earn a total of  37.00  from holding Healthcare Co or generate 5.43% return on investment over 90 days.

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

AVCON Information Tech  vs.  Healthcare Co

AVCON Information Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVCON Information Tech are ranked lower than 9 (%) 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.

Healthcare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVCON Information and Healthcare

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

The idea behind AVCON Information Tech and Healthcare Co 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.