Correlation Between AVALON TECHNOLOGIES and Indian Railway

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

Diversification Opportunities for AVALON TECHNOLOGIES and Indian Railway

0.19

Correlation Coefficient

AVALON TECHNOLOGIES  Indian Railway

Average diversification

The 3 months correlation between AVALON and Indian is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and Indian Railway Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Railway Finance 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 Indian Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Railway Finance has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and Indian Railway go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and Indian Railway

Assuming the 90 days trading horizon AVALON TECHNOLOGIES is expected to generate 1.66 times less return on investment than Indian Railway. But when comparing it to its historical volatility, AVALON TECHNOLOGIES LTD is 1.16 times less risky than Indian Railway. It trades about 0.09 of its potential returns per unit of risk. Indian Railway Finance is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,823  in Indian Railway Finance on October 6, 2024 and sell it today you would earn a total of  12,547  from holding Indian Railway Finance or generate 444.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.81%
Values	Daily Returns

AVALON TECHNOLOGIES LTD  vs.  Indian Railway Finance

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 uncertain essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Indian Railway Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Railway Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Railway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AVALON TECHNOLOGIES and Indian Railway

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

The idea behind AVALON TECHNOLOGIES LTD and Indian Railway Finance 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.