Correlation Between Avalon Holdings and OriginClear

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

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

Diversification Opportunities for Avalon Holdings and OriginClear

0.26

Correlation Coefficient

Avalon Holdings  OriginClear

Modest diversification

The 3 months correlation between Avalon and OriginClear is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Avalon Holdings and OriginClear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OriginClear 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 OriginClear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OriginClear has no effect on the direction of Avalon Holdings i.e., Avalon Holdings and OriginClear go up and down completely randomly.

Pair Corralation between Avalon Holdings and OriginClear

Considering the 90-day investment horizon Avalon Holdings is expected to under-perform the OriginClear. But the stock apears to be less risky and, when comparing its historical volatility, Avalon Holdings is 2.82 times less risky than OriginClear. The stock trades about -0.05 of its potential returns per unit of risk. The OriginClear is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.29  in OriginClear on December 30, 2024 and sell it today you would lose (0.03) from holding OriginClear or give up 10.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Avalon Holdings  vs.  OriginClear

Avalon Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avalon Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

OriginClear

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Avalon Holdings and OriginClear

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

The idea behind Avalon Holdings and OriginClear 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.