Correlation Between JGCHEMICALS and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for JGCHEMICALS and AVALON TECHNOLOGIES

0.66

Correlation Coefficient

JGCHEMICALS  AVALON TECHNOLOGIES

Poor diversification

The 3 months correlation between JGCHEMICALS and AVALON is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding JGCHEMICALS LIMITED 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 JGCHEMICALS 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 JGCHEMICALS LIMITED 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 JGCHEMICALS i.e., JGCHEMICALS and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between JGCHEMICALS and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon JGCHEMICALS LIMITED is expected to under-perform the AVALON TECHNOLOGIES. But the stock apears to be less risky and, when comparing its historical volatility, JGCHEMICALS LIMITED is 1.09 times less risky than AVALON TECHNOLOGIES. The stock trades about 0.0 of its potential returns per unit of risk. The AVALON TECHNOLOGIES LTD is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  62,655  in AVALON TECHNOLOGIES LTD on October 11, 2024 and sell it today you would earn a total of  31,175  from holding AVALON TECHNOLOGIES LTD or generate 49.76% return on investment over 90 days.

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

JGCHEMICALS LIMITED  vs.  AVALON TECHNOLOGIES LTD

JGCHEMICALS LIMITED

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days JGCHEMICALS LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, JGCHEMICALS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 weak essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JGCHEMICALS and AVALON TECHNOLOGIES

The main advantage of trading using opposite JGCHEMICALS and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JGCHEMICALS 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 JGCHEMICALS LIMITED 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.