Correlation Between AVALON TECHNOLOGIES and PYRAMID TECHNOPLAST

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

Diversification Opportunities for AVALON TECHNOLOGIES and PYRAMID TECHNOPLAST

0.41

Correlation Coefficient

AVALON TECHNOLOGIES  PYRAMID TECHNOPLAST

Very weak diversification

The 3 months correlation between AVALON and PYRAMID is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and PYRAMID TECHNOPLAST ORD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PYRAMID TECHNOPLAST ORD 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 PYRAMID TECHNOPLAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PYRAMID TECHNOPLAST ORD has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and PYRAMID TECHNOPLAST go up and down completely randomly.

Pair Corralation between AVALON TECHNOLOGIES and PYRAMID TECHNOPLAST

Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to generate 0.99 times more return on investment than PYRAMID TECHNOPLAST. However, AVALON TECHNOLOGIES LTD is 1.01 times less risky than PYRAMID TECHNOPLAST. It trades about 0.25 of its potential returns per unit of risk. PYRAMID TECHNOPLAST ORD is currently generating about 0.08 per unit of risk. If you would invest  50,770  in AVALON TECHNOLOGIES LTD on September 2, 2024 and sell it today you would earn a total of  45,720  from holding AVALON TECHNOLOGIES LTD or generate 90.05% return on investment over 90 days.

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

AVALON TECHNOLOGIES LTD  vs.  PYRAMID TECHNOPLAST ORD

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

PYRAMID TECHNOPLAST ORD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PYRAMID TECHNOPLAST ORD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, PYRAMID TECHNOPLAST exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVALON TECHNOLOGIES and PYRAMID TECHNOPLAST

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

The idea behind AVALON TECHNOLOGIES LTD and PYRAMID TECHNOPLAST ORD 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.