Correlation Between AVALON TECHNOLOGIES and Dodla Dairy

Can any of the company-specific risk be diversified away by investing in both AVALON TECHNOLOGIES and Dodla Dairy 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 Dodla Dairy 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 Dodla Dairy Limited, you can compare the effects of market volatilities on AVALON TECHNOLOGIES and Dodla Dairy 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 Dodla Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVALON TECHNOLOGIES and Dodla Dairy.

Diversification Opportunities for AVALON TECHNOLOGIES and Dodla Dairy

0.11

Correlation Coefficient

AVALON TECHNOLOGIES  Dodla Dairy

Average diversification

The 3 months correlation between AVALON and Dodla is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and Dodla Dairy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodla Dairy Limited 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 Dodla Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodla Dairy Limited has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and Dodla Dairy go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and Dodla Dairy

Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to under-perform the Dodla Dairy. In addition to that, AVALON TECHNOLOGIES is 1.55 times more volatile than Dodla Dairy Limited. It trades about -0.42 of its total potential returns per unit of risk. Dodla Dairy Limited is currently generating about -0.29 per unit of volatility. If you would invest  124,100  in Dodla Dairy Limited on October 25, 2024 and sell it today you would lose (16,100) from holding Dodla Dairy Limited or give up 12.97% of portfolio value over 90 days.

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

AVALON TECHNOLOGIES LTD  vs.  Dodla Dairy Limited

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Dodla Dairy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodla Dairy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with AVALON TECHNOLOGIES and Dodla Dairy

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

The idea behind AVALON TECHNOLOGIES LTD and Dodla Dairy Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.