Correlation Between Avonmore Capital and Golden Tobacco

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

Diversification Opportunities for Avonmore Capital and Golden Tobacco

0.48

Correlation Coefficient

Avonmore Capital  Golden Tobacco

Very weak diversification

The 3 months correlation between Avonmore and Golden is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Avonmore Capital Management and Golden Tobacco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Tobacco 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 Golden Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Tobacco has no effect on the direction of Avonmore Capital i.e., Avonmore Capital and Golden Tobacco go up and down completely randomly.

Pair Corralation between Avonmore Capital and Golden Tobacco

Assuming the 90 days trading horizon Avonmore Capital Management is expected to generate 1.57 times more return on investment than Golden Tobacco. However, Avonmore Capital is 1.57 times more volatile than Golden Tobacco Limited. It trades about 0.01 of its potential returns per unit of risk. Golden Tobacco Limited is currently generating about -0.05 per unit of risk. If you would invest  1,767  in Avonmore Capital Management on December 29, 2024 and sell it today you would lose (66.00) from holding Avonmore Capital Management or give up 3.74% of portfolio value over 90 days.

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

Avonmore Capital Management  vs.  Golden Tobacco Limited

Avonmore Capital Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avonmore Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Avonmore Capital is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Golden Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Golden Tobacco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Avonmore Capital and Golden Tobacco

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

The idea behind Avonmore Capital Management and Golden Tobacco 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.