Correlation Between Enviri and Avalon Holdings

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

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

Diversification Opportunities for Enviri and Avalon Holdings

-0.73

Correlation Coefficient

Enviri  Avalon Holdings

Pay attention - limited upside

The 3 months correlation between Enviri and Avalon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Enviri and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and Enviri 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 Enviri 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 Enviri i.e., Enviri and Avalon Holdings go up and down completely randomly.

Pair Corralation between Enviri and Avalon Holdings

Given the investment horizon of 90 days Enviri is expected to under-perform the Avalon Holdings. In addition to that, Enviri is 1.08 times more volatile than Avalon Holdings. It trades about -0.12 of its total potential returns per unit of risk. Avalon Holdings is currently generating about 0.1 per unit of volatility. If you would invest  256.00  in Avalon Holdings on September 4, 2024 and sell it today you would earn a total of  60.00  from holding Avalon Holdings or generate 23.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Enviri  vs.  Avalon Holdings

Enviri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enviri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Avalon Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avalon Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Avalon Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enviri and Avalon Holdings

The main advantage of trading using opposite Enviri and Avalon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enviri 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 Enviri 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.