Correlation Between Adcorp and Avi

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

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

Diversification Opportunities for Adcorp and Avi

-0.14

Correlation Coefficient

Adcorp  Avi

Good diversification

The 3 months correlation between Adcorp and Avi is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Adcorp and Avi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avi and Adcorp 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 Adcorp are associated (or correlated) with Avi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avi has no effect on the direction of Adcorp i.e., Adcorp and Avi go up and down completely randomly.

Pair Corralation between Adcorp and Avi

Assuming the 90 days trading horizon Adcorp is expected to generate 2.97 times more return on investment than Avi. However, Adcorp is 2.97 times more volatile than Avi. It trades about 0.03 of its potential returns per unit of risk. Avi is currently generating about 0.07 per unit of risk. If you would invest  47,500  in Adcorp on September 24, 2024 and sell it today you would earn a total of  500.00  from holding Adcorp or generate 1.05% return on investment over 90 days.

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

Adcorp  vs.  Avi

Adcorp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Adcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adcorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Avi

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Avi has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Avi is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Adcorp and Avi

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

The idea behind Adcorp and Avi 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.