Correlation Between Cass Information and Avalon Holdings

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

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

Diversification Opportunities for Cass Information and Avalon Holdings

-0.64

Correlation Coefficient

Cass Information  Avalon Holdings

Excellent diversification

The 3 months correlation between Cass and Avalon is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and Cass Information 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 Cass Information Systems are associated (or correlated) with Avalon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Holdings has no effect on the direction of Cass Information i.e., Cass Information and Avalon Holdings go up and down completely randomly.

Pair Corralation between Cass Information and Avalon Holdings

Given the investment horizon of 90 days Cass Information Systems is expected to generate 0.38 times more return on investment than Avalon Holdings. However, Cass Information Systems is 2.65 times less risky than Avalon Holdings. It trades about 0.07 of its potential returns per unit of risk. Avalon Holdings is currently generating about -0.03 per unit of risk. If you would invest  4,074  in Cass Information Systems on December 27, 2024 and sell it today you would earn a total of  239.00  from holding Cass Information Systems or generate 5.87% return on investment over 90 days.

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

Cass Information Systems  vs.  Avalon Holdings

Cass Information Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cass Information may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Cass Information and Avalon Holdings

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

The idea behind Cass Information Systems and Avalon Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.