Correlation Between IRay Technology and AVCON Information

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

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

Diversification Opportunities for IRay Technology and AVCON Information

0.41

Correlation Coefficient

IRay Technology  AVCON Information

Very weak diversification

The 3 months correlation between IRay and AVCON is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding iRay Technology Co and AVCON Information Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVCON Information Tech and IRay Technology 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 iRay Technology Co are associated (or correlated) with AVCON Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVCON Information Tech has no effect on the direction of IRay Technology i.e., IRay Technology and AVCON Information go up and down completely randomly.

Pair Corralation between IRay Technology and AVCON Information

Assuming the 90 days trading horizon iRay Technology Co is expected to under-perform the AVCON Information. But the stock apears to be less risky and, when comparing its historical volatility, iRay Technology Co is 1.13 times less risky than AVCON Information. The stock trades about -0.13 of its potential returns per unit of risk. The AVCON Information Tech is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  472.00  in AVCON Information Tech on September 23, 2024 and sell it today you would earn a total of  27.00  from holding AVCON Information Tech or generate 5.72% return on investment over 90 days.

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

iRay Technology Co  vs.  AVCON Information Tech

iRay Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iRay Technology Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IRay Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

AVCON Information Tech

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVCON Information Tech are ranked lower than 14 (%) 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.

Pair Trading with IRay Technology and AVCON Information

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

The idea behind iRay Technology Co and AVCON Information Tech 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.