Correlation Between AVALON TECHNOLOGIES and Mangalore Chemicals

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

Diversification Opportunities for AVALON TECHNOLOGIES and Mangalore Chemicals

0.34

Correlation Coefficient

AVALON TECHNOLOGIES  Mangalore Chemicals

Weak diversification

The 3 months correlation between AVALON and Mangalore is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and Mangalore Chemicals Fertilizer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mangalore Chemicals 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 Mangalore Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mangalore Chemicals has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and Mangalore Chemicals go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and Mangalore Chemicals

Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to under-perform the Mangalore Chemicals. In addition to that, AVALON TECHNOLOGIES is 1.34 times more volatile than Mangalore Chemicals Fertilizers. It trades about -0.09 of its total potential returns per unit of risk. Mangalore Chemicals Fertilizers is currently generating about 0.01 per unit of volatility. If you would invest  15,387  in Mangalore Chemicals Fertilizers on December 28, 2024 and sell it today you would lose (113.00) from holding Mangalore Chemicals Fertilizers or give up 0.73% of portfolio value over 90 days.

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

AVALON TECHNOLOGIES LTD  vs.  Mangalore Chemicals Fertilizer

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days AVALON TECHNOLOGIES LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mangalore Chemicals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with AVALON TECHNOLOGIES and Mangalore Chemicals

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

The idea behind AVALON TECHNOLOGIES LTD and Mangalore Chemicals Fertilizers 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.