Correlation Between Dev Information and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Dev Information and AVALON TECHNOLOGIES

0.65

Correlation Coefficient

Dev Information  AVALON TECHNOLOGIES

Poor diversification

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

Pair Corralation between Dev Information and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Dev Information is expected to generate 3.48 times less return on investment than AVALON TECHNOLOGIES. But when comparing it to its historical volatility, Dev Information Technology is 1.13 times less risky than AVALON TECHNOLOGIES. It trades about 0.07 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  54,870  in AVALON TECHNOLOGIES LTD on October 8, 2024 and sell it today you would earn a total of  37,160  from holding AVALON TECHNOLOGIES LTD or generate 67.72% return on investment over 90 days.

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

Dev Information Technology  vs.  AVALON TECHNOLOGIES LTD

Dev Information Tech

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dev Information Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Dev Information displayed solid returns over the last few months and may actually be approaching a breakup point.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dev Information and AVALON TECHNOLOGIES

The main advantage of trading using opposite Dev Information and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dev Information 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 Dev Information Technology 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.