Correlation Between Avonmore Capital and Roto Pumps

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

Diversification Opportunities for Avonmore Capital and Roto Pumps

-0.05

Correlation Coefficient

Avonmore Capital  Roto Pumps

Good diversification

The 3 months correlation between Avonmore and Roto is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Avonmore Capital Management and Roto Pumps Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roto Pumps 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 Roto Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roto Pumps Limited has no effect on the direction of Avonmore Capital i.e., Avonmore Capital and Roto Pumps go up and down completely randomly.

Pair Corralation between Avonmore Capital and Roto Pumps

Assuming the 90 days trading horizon Avonmore Capital Management is expected to under-perform the Roto Pumps. But the stock apears to be less risky and, when comparing its historical volatility, Avonmore Capital Management is 1.04 times less risky than Roto Pumps. The stock trades about -0.56 of its potential returns per unit of risk. The Roto Pumps Limited is currently generating about -0.44 of returns per unit of risk over similar time horizon. If you would invest  26,260  in Roto Pumps Limited on December 5, 2024 and sell it today you would lose (7,041) from holding Roto Pumps Limited or give up 26.81% of portfolio value over 90 days.

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

Avonmore Capital Management  vs.  Roto Pumps 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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Roto Pumps Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roto Pumps Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 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 Roto Pumps

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

The idea behind Avonmore Capital Management and Roto Pumps 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.