Correlation Between Patanjali Foods and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Patanjali Foods and AVALON TECHNOLOGIES

0.22

Correlation Coefficient

Patanjali Foods  AVALON TECHNOLOGIES

Modest diversification

The 3 months correlation between Patanjali and AVALON is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods 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 Patanjali Foods 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 Patanjali Foods 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 Patanjali Foods i.e., Patanjali Foods and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Patanjali Foods and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Patanjali Foods Limited is expected to generate 0.44 times more return on investment than AVALON TECHNOLOGIES. However, Patanjali Foods Limited is 2.27 times less risky than AVALON TECHNOLOGIES. It trades about 0.18 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about -0.35 per unit of risk. If you would invest  174,430  in Patanjali Foods Limited on October 24, 2024 and sell it today you would earn a total of  8,945  from holding Patanjali Foods Limited or generate 5.13% return on investment over 90 days.

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

Patanjali Foods Limited  vs.  AVALON TECHNOLOGIES LTD

Patanjali Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Patanjali Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Patanjali Foods and AVALON TECHNOLOGIES

The main advantage of trading using opposite Patanjali Foods and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patanjali Foods 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 Patanjali Foods 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.