Correlation Between AVALON TECHNOLOGIES and Max Financial

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

Diversification Opportunities for AVALON TECHNOLOGIES and Max Financial

0.1

Correlation Coefficient

AVALON TECHNOLOGIES  Max Financial

Average diversification

The 3 months correlation between AVALON and Max is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and Max Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Max Financial Services 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 Max Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Max Financial Services has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and Max Financial go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and Max Financial

Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to generate 1.47 times more return on investment than Max Financial. However, AVALON TECHNOLOGIES is 1.47 times more volatile than Max Financial Services. It trades about 0.1 of its potential returns per unit of risk. Max Financial Services is currently generating about 0.03 per unit of risk. If you would invest  52,180  in AVALON TECHNOLOGIES LTD on September 4, 2024 and sell it today you would earn a total of  39,465  from holding AVALON TECHNOLOGIES LTD or generate 75.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

AVALON TECHNOLOGIES LTD  vs.  Max Financial Services

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 19 (%) 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.

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AVALON TECHNOLOGIES and Max Financial

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

The idea behind AVALON TECHNOLOGIES LTD and Max Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.