Correlation Between Max Financial and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Max Financial and AVALON TECHNOLOGIES

0.1

Correlation Coefficient

Max Financial  AVALON TECHNOLOGIES

Average diversification

The 3 months correlation between Max and AVALON is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Max Financial Services 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 Max Financial 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 Max Financial Services 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 Max Financial i.e., Max Financial and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Max Financial and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Max Financial Services is expected to under-perform the AVALON TECHNOLOGIES. But the stock apears to be less risky and, when comparing its historical volatility, Max Financial Services is 2.43 times less risky than AVALON TECHNOLOGIES. The stock trades about -0.01 of its potential returns per unit of risk. The AVALON TECHNOLOGIES LTD is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  51,790  in AVALON TECHNOLOGIES LTD on September 4, 2024 and sell it today you would earn a total of  43,855  from holding AVALON TECHNOLOGIES LTD or generate 84.68% return on investment over 90 days.

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

Max Financial Services  vs.  AVALON TECHNOLOGIES LTD

Max Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Max Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Max Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 19 (%) 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 Max Financial and AVALON TECHNOLOGIES

The main advantage of trading using opposite Max Financial and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Max Financial 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 Max Financial Services 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.

Check out your portfolio center.

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.