Correlation Between AVALON TECHNOLOGIES and Datamatics Global

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

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

Diversification Opportunities for AVALON TECHNOLOGIES and Datamatics Global

0.36

Correlation Coefficient

AVALON TECHNOLOGIES  Datamatics Global

Weak diversification

The 3 months correlation between AVALON and Datamatics is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and Datamatics Global Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datamatics Global and AVALON TECHNOLOGIES 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 AVALON TECHNOLOGIES LTD are associated (or correlated) with Datamatics Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datamatics Global has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and Datamatics Global go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and Datamatics Global

Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to generate 1.26 times more return on investment than Datamatics Global. However, AVALON TECHNOLOGIES is 1.26 times more volatile than Datamatics Global Services. It trades about 0.15 of its potential returns per unit of risk. Datamatics Global Services is currently generating about 0.04 per unit of risk. If you would invest  53,690  in AVALON TECHNOLOGIES LTD on October 8, 2024 and sell it today you would earn a total of  43,625  from holding AVALON TECHNOLOGIES LTD or generate 81.25% return on investment over 90 days.

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

AVALON TECHNOLOGIES LTD  vs.  Datamatics Global Services

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Datamatics Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datamatics Global Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Datamatics Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVALON TECHNOLOGIES and Datamatics Global

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

The idea behind AVALON TECHNOLOGIES LTD and Datamatics Global Services 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.