Correlation Between Gujarat Lease and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Gujarat Lease and AVALON TECHNOLOGIES

0.39

Correlation Coefficient

Gujarat Lease  AVALON TECHNOLOGIES

Weak diversification

The 3 months correlation between Gujarat and AVALON is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing 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 Gujarat Lease 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 Gujarat Lease Financing 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 Gujarat Lease i.e., Gujarat Lease and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Gujarat Lease and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Gujarat Lease is expected to generate 1.13 times less return on investment than AVALON TECHNOLOGIES. In addition to that, Gujarat Lease is 1.01 times more volatile than AVALON TECHNOLOGIES LTD. It trades about 0.08 of its total potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about 0.09 per unit of volatility. If you would invest  39,800  in AVALON TECHNOLOGIES LTD on September 20, 2024 and sell it today you would earn a total of  59,755  from holding AVALON TECHNOLOGIES LTD or generate 150.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.07%
Values	Daily Returns

Gujarat Lease Financing  vs.  AVALON TECHNOLOGIES LTD

Gujarat Lease Financing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gujarat Lease and AVALON TECHNOLOGIES

The main advantage of trading using opposite Gujarat Lease and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Lease 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 Gujarat Lease Financing 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.