Correlation Between AVALON TECHNOLOGIES and JGCHEMICALS

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

Diversification Opportunities for AVALON TECHNOLOGIES and JGCHEMICALS

0.67

Correlation Coefficient

AVALON TECHNOLOGIES  JGCHEMICALS

Poor diversification

The 3 months correlation between AVALON and JGCHEMICALS is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and JGCHEMICALS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JGCHEMICALS 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 JGCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JGCHEMICALS LIMITED has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and JGCHEMICALS go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and JGCHEMICALS

Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to generate 1.2 times more return on investment than JGCHEMICALS. However, AVALON TECHNOLOGIES is 1.2 times more volatile than JGCHEMICALS LIMITED. It trades about 0.1 of its potential returns per unit of risk. JGCHEMICALS LIMITED is currently generating about 0.04 per unit of risk. If you would invest  57,350  in AVALON TECHNOLOGIES LTD on October 26, 2024 and sell it today you would earn a total of  14,300  from holding AVALON TECHNOLOGIES LTD or generate 24.93% return on investment over 90 days.

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

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

JGCHEMICALS LIMITED

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGCHEMICALS LIMITED are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical indicators, JGCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AVALON TECHNOLOGIES and JGCHEMICALS

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

The idea behind AVALON TECHNOLOGIES LTD and JGCHEMICALS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.