Correlation Between Bosch and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Bosch and AVALON TECHNOLOGIES

0.9

Correlation Coefficient

Bosch  AVALON TECHNOLOGIES

Almost no diversification

The 3 months correlation between Bosch and AVALON is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bosch Limited and AVALON TECHNOLOGIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALON TECHNOLOGIES LTD and Bosch 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 Bosch Limited are associated (or correlated) with AVALON TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALON TECHNOLOGIES LTD has no effect on the direction of Bosch i.e., Bosch and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Bosch and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Bosch Limited is expected to under-perform the AVALON TECHNOLOGIES. But the stock apears to be less risky and, when comparing its historical volatility, Bosch Limited is 2.49 times less risky than AVALON TECHNOLOGIES. The stock trades about -0.23 of its potential returns per unit of risk. The AVALON TECHNOLOGIES LTD is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  94,860  in AVALON TECHNOLOGIES LTD on December 25, 2024 and sell it today you would lose (19,580) from holding AVALON TECHNOLOGIES LTD or give up 20.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Bosch Limited  vs.  AVALON TECHNOLOGIES LTD

Bosch Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bosch Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential 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.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days AVALON TECHNOLOGIES LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bosch and AVALON TECHNOLOGIES

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

The idea behind Bosch Limited and AVALON TECHNOLOGIES LTD 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.