Correlation Between Branded Legacy and Avi

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

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

Diversification Opportunities for Branded Legacy and Avi

-0.28

Correlation Coefficient

Branded Legacy  Avi

Very good diversification

The 3 months correlation between Branded and Avi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Branded Legacy and Avi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avi Ltd ADR and Branded Legacy 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 Branded Legacy are associated (or correlated) with Avi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avi Ltd ADR has no effect on the direction of Branded Legacy i.e., Branded Legacy and Avi go up and down completely randomly.

Pair Corralation between Branded Legacy and Avi

Given the investment horizon of 90 days Branded Legacy is expected to generate 6.03 times more return on investment than Avi. However, Branded Legacy is 6.03 times more volatile than Avi Ltd ADR. It trades about 0.08 of its potential returns per unit of risk. Avi Ltd ADR is currently generating about 0.08 per unit of risk. If you would invest  0.10  in Branded Legacy on October 5, 2024 and sell it today you would lose (0.05) from holding Branded Legacy or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.87%
Values	Daily Returns

Branded Legacy  vs.  Avi Ltd ADR

Branded Legacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Branded Legacy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Avi Ltd ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avi Ltd ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Avi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Branded Legacy and Avi

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

The idea behind Branded Legacy and Avi Ltd ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..