Correlation Between AVY Precision and XAC Automation

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

By analyzing existing cross correlation between AVY Precision Technology and XAC Automation, you can compare the effects of market volatilities on AVY Precision and XAC Automation 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 AVY Precision with a short position of XAC Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVY Precision and XAC Automation.

Diversification Opportunities for AVY Precision and XAC Automation

0.43

Correlation Coefficient

AVY Precision  XAC Automation

Very weak diversification

The 3 months correlation between AVY and XAC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AVY Precision Technology and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation and AVY Precision 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 AVY Precision Technology are associated (or correlated) with XAC Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAC Automation has no effect on the direction of AVY Precision i.e., AVY Precision and XAC Automation go up and down completely randomly.

Pair Corralation between AVY Precision and XAC Automation

Assuming the 90 days trading horizon AVY Precision Technology is expected to generate 1.5 times more return on investment than XAC Automation. However, AVY Precision is 1.5 times more volatile than XAC Automation. It trades about 0.02 of its potential returns per unit of risk. XAC Automation is currently generating about 0.0 per unit of risk. If you would invest  3,705  in AVY Precision Technology on December 26, 2024 and sell it today you would lose (20.00) from holding AVY Precision Technology or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

AVY Precision Technology  vs.  XAC Automation

AVY Precision Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AVY Precision Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AVY Precision is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

XAC Automation

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AVY Precision and XAC Automation

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

The idea behind AVY Precision Technology and XAC Automation 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 Global Correlations module to find global opportunities by holding instruments from different markets.