Correlation Between Bodhi Tree and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Bodhi Tree and AVALON TECHNOLOGIES

-0.65

Correlation Coefficient

Bodhi Tree  AVALON TECHNOLOGIES

Excellent diversification

The 3 months correlation between Bodhi and AVALON is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bodhi Tree Multimedia 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 Bodhi Tree 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 Bodhi Tree Multimedia 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 Bodhi Tree i.e., Bodhi Tree and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Bodhi Tree and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Bodhi Tree Multimedia is expected to generate 24.93 times more return on investment than AVALON TECHNOLOGIES. However, Bodhi Tree is 24.93 times more volatile than AVALON TECHNOLOGIES LTD. It trades about 0.07 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about 0.07 per unit of risk. If you would invest  1,742  in Bodhi Tree Multimedia on October 23, 2024 and sell it today you would lose (524.00) from holding Bodhi Tree Multimedia or give up 30.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.53%
Values	Daily Returns

Bodhi Tree Multimedia  vs.  AVALON TECHNOLOGIES LTD

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bodhi Tree is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bodhi Tree and AVALON TECHNOLOGIES

The main advantage of trading using opposite Bodhi Tree and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bodhi Tree 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 Bodhi Tree Multimedia 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.