Correlation Between Lancaster Colony and Avi

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

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

Diversification Opportunities for Lancaster Colony and Avi

0.43

Correlation Coefficient

Lancaster Colony  Avi

Very weak diversification

The 3 months correlation between Lancaster and Avi is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Avi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avi Ltd ADR and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Avi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avi Ltd ADR has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Avi go up and down completely randomly.

Pair Corralation between Lancaster Colony and Avi

Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the Avi. But the stock apears to be less risky and, when comparing its historical volatility, Lancaster Colony is 2.43 times less risky than Avi. The stock trades about -0.02 of its potential returns per unit of risk. The Avi Ltd ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,168  in Avi Ltd ADR on September 3, 2024 and sell it today you would earn a total of  642.00  from holding Avi Ltd ADR or generate 29.61% return on investment over 90 days.

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

Lancaster Colony  vs.  Avi Ltd ADR

Lancaster Colony

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Lancaster Colony may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Avi Ltd ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avi Ltd ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Avi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Avi

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

The idea behind Lancaster Colony and Avi Ltd ADR 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.