Correlation Between Avonmore Capital and Cummins India

Can any of the company-specific risk be diversified away by investing in both Avonmore Capital and Cummins India 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 Avonmore Capital and Cummins India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avonmore Capital Management and Cummins India Limited, you can compare the effects of market volatilities on Avonmore Capital and Cummins India 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 Avonmore Capital with a short position of Cummins India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avonmore Capital and Cummins India.

Diversification Opportunities for Avonmore Capital and Cummins India

-0.6

Correlation Coefficient

Avonmore Capital  Cummins India

Excellent diversification

The 3 months correlation between Avonmore and Cummins is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Avonmore Capital Management and Cummins India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins India Limited and Avonmore Capital 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 Avonmore Capital Management are associated (or correlated) with Cummins India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins India Limited has no effect on the direction of Avonmore Capital i.e., Avonmore Capital and Cummins India go up and down completely randomly.

Pair Corralation between Avonmore Capital and Cummins India

Assuming the 90 days trading horizon Avonmore Capital Management is expected to generate 4.19 times more return on investment than Cummins India. However, Avonmore Capital is 4.19 times more volatile than Cummins India Limited. It trades about 0.42 of its potential returns per unit of risk. Cummins India Limited is currently generating about -0.42 per unit of risk. If you would invest  1,452  in Avonmore Capital Management on October 24, 2024 and sell it today you would earn a total of  984.00  from holding Avonmore Capital Management or generate 67.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Avonmore Capital Management  vs.  Cummins India Limited

Avonmore Capital Man

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avonmore Capital Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Avonmore Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Cummins India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cummins India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Avonmore Capital and Cummins India

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

The idea behind Avonmore Capital Management and Cummins India 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.