Correlation Between AV Tech and Champion Building

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Can any of the company-specific risk be diversified away by investing in both AV Tech and Champion Building 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 AV Tech and Champion Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AV Tech Corp and Champion Building Materials, you can compare the effects of market volatilities on AV Tech and Champion Building 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 AV Tech with a short position of Champion Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of AV Tech and Champion Building.

Diversification Opportunities for AV Tech and Champion Building

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between 8072 and Champion is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding AV Tech Corp and Champion Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Building and AV Tech 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 AV Tech Corp are associated (or correlated) with Champion Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Building has no effect on the direction of AV Tech i.e., AV Tech and Champion Building go up and down completely randomly.

Pair Corralation between AV Tech and Champion Building

Assuming the 90 days trading horizon AV Tech Corp is expected to under-perform the Champion Building. But the stock apears to be less risky and, when comparing its historical volatility, AV Tech Corp is 1.28 times less risky than Champion Building. The stock trades about -0.35 of its potential returns per unit of risk. The Champion Building Materials is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Champion Building Materials on September 11, 2024 and sell it today you would earn a total of  10.00  from holding Champion Building Materials or generate 0.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

AV Tech Corp  vs.  Champion Building Materials

 Performance 
       Timeline  
AV Tech Corp 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in AV Tech Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, AV Tech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Champion Building 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Champion Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AV Tech and Champion Building Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AV Tech and Champion Building

The main advantage of trading using opposite AV Tech and Champion Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AV Tech position performs unexpectedly, Champion Building 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 Champion Building will offset losses from the drop in Champion Building's long position.
The idea behind AV Tech Corp and Champion Building Materials 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.
Check out your portfolio center.
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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