Correlation Between Avonmore Capital and Interarch Building

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

Diversification Opportunities for Avonmore Capital and Interarch Building

0.04

Correlation Coefficient

Avonmore Capital  Interarch Building

Significant diversification

The 3 months correlation between Avonmore and Interarch is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Avonmore Capital Management and Interarch Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interarch Building 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 Interarch Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interarch Building has no effect on the direction of Avonmore Capital i.e., Avonmore Capital and Interarch Building go up and down completely randomly.

Pair Corralation between Avonmore Capital and Interarch Building

Assuming the 90 days trading horizon Avonmore Capital Management is expected to generate 1.73 times more return on investment than Interarch Building. However, Avonmore Capital is 1.73 times more volatile than Interarch Building Products. It trades about 0.2 of its potential returns per unit of risk. Interarch Building Products is currently generating about 0.04 per unit of risk. If you would invest  1,600  in Avonmore Capital Management on October 7, 2024 and sell it today you would earn a total of  741.00  from holding Avonmore Capital Management or generate 46.31% return on investment over 90 days.

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

Avonmore Capital Management  vs.  Interarch Building Products

Avonmore Capital Man

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avonmore Capital Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Avonmore Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Interarch Building

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Avonmore Capital and Interarch Building

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

The idea behind Avonmore Capital Management and Interarch Building Products 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.