Correlation Between Avalon Holdings and SemiLEDS

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

By analyzing existing cross correlation between Avalon Holdings and SemiLEDS, you can compare the effects of market volatilities on Avalon Holdings and SemiLEDS 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 Holdings with a short position of SemiLEDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalon Holdings and SemiLEDS.

Diversification Opportunities for Avalon Holdings and SemiLEDS

0.61

Correlation Coefficient

Avalon Holdings  SemiLEDS

Poor diversification

The 3 months correlation between Avalon and SemiLEDS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Avalon Holdings and SemiLEDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SemiLEDS and Avalon Holdings 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 Holdings are associated (or correlated) with SemiLEDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SemiLEDS has no effect on the direction of Avalon Holdings i.e., Avalon Holdings and SemiLEDS go up and down completely randomly.

Pair Corralation between Avalon Holdings and SemiLEDS

Considering the 90-day investment horizon Avalon Holdings is expected to generate 0.6 times more return on investment than SemiLEDS. However, Avalon Holdings is 1.67 times less risky than SemiLEDS. It trades about 0.24 of its potential returns per unit of risk. SemiLEDS is currently generating about 0.07 per unit of risk. If you would invest  322.00  in Avalon Holdings on October 11, 2024 and sell it today you would earn a total of  54.00  from holding Avalon Holdings or generate 16.77% return on investment over 90 days.

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

Avalon Holdings  vs.  SemiLEDS

Avalon Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avalon Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Avalon Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

SemiLEDS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SemiLEDS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, SemiLEDS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avalon Holdings and SemiLEDS

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

The idea behind Avalon Holdings and SemiLEDS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.