Correlation Between EcoPlus and Avalon Holdings

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

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

Diversification Opportunities for EcoPlus and Avalon Holdings

0.38

Correlation Coefficient

EcoPlus  Avalon Holdings

Weak diversification

The 3 months correlation between EcoPlus and Avalon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding EcoPlus and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and EcoPlus 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 EcoPlus 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 EcoPlus i.e., EcoPlus and Avalon Holdings go up and down completely randomly.

Pair Corralation between EcoPlus and Avalon Holdings

Given the investment horizon of 90 days EcoPlus is expected to under-perform the Avalon Holdings. In addition to that, EcoPlus is 3.79 times more volatile than Avalon Holdings. It trades about -0.04 of its total potential returns per unit of risk. Avalon Holdings is currently generating about -0.05 per unit of volatility. If you would invest  348.00  in Avalon Holdings on December 29, 2024 and sell it today you would lose (55.00) from holding Avalon Holdings or give up 15.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

EcoPlus  vs.  Avalon Holdings

EcoPlus

Risk-Adjusted Performance

Very Weak

Over the last 90 days EcoPlus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 fragile performance in the last few months, the Stock's basic indicators remain fairly 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 EcoPlus and Avalon Holdings

The main advantage of trading using opposite EcoPlus and Avalon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EcoPlus 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 EcoPlus 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .