Correlation Between Roto Pumps and Avonmore Capital

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

By analyzing existing cross correlation between Roto Pumps Limited and Avonmore Capital Management, you can compare the effects of market volatilities on Roto Pumps and Avonmore Capital 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 Roto Pumps with a short position of Avonmore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roto Pumps and Avonmore Capital.

Diversification Opportunities for Roto Pumps and Avonmore Capital

0.18

Correlation Coefficient

Roto Pumps  Avonmore Capital

Average diversification

The 3 months correlation between Roto and Avonmore is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Roto Pumps Limited and Avonmore Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avonmore Capital Man and Roto Pumps 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 Roto Pumps Limited are associated (or correlated) with Avonmore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avonmore Capital Man has no effect on the direction of Roto Pumps i.e., Roto Pumps and Avonmore Capital go up and down completely randomly.

Pair Corralation between Roto Pumps and Avonmore Capital

Assuming the 90 days trading horizon Roto Pumps Limited is expected to generate 0.93 times more return on investment than Avonmore Capital. However, Roto Pumps Limited is 1.07 times less risky than Avonmore Capital. It trades about 0.08 of its potential returns per unit of risk. Avonmore Capital Management is currently generating about -0.06 per unit of risk. If you would invest  27,877  in Roto Pumps Limited on September 17, 2024 and sell it today you would earn a total of  3,813  from holding Roto Pumps Limited or generate 13.68% return on investment over 90 days.

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

Roto Pumps Limited  vs.  Avonmore Capital Management

Roto Pumps Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Roto Pumps Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Roto Pumps unveiled solid returns over the last few months and may actually be approaching a breakup point.

Avonmore Capital Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avonmore Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Roto Pumps and Avonmore Capital

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

The idea behind Roto Pumps Limited and Avonmore Capital Management 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.