Correlation Between Transport and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Transport and AVALON TECHNOLOGIES

0.24

Correlation Coefficient

Transport  AVALON TECHNOLOGIES

Modest diversification

The 3 months correlation between Transport and AVALON is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Transport of 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 Transport 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 Transport of 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 Transport i.e., Transport and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Transport and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon Transport is expected to generate 4.67 times less return on investment than AVALON TECHNOLOGIES. But when comparing it to its historical volatility, Transport of is 1.59 times less risky than AVALON TECHNOLOGIES. It trades about 0.06 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  57,155  in AVALON TECHNOLOGIES LTD on October 23, 2024 and sell it today you would earn a total of  26,110  from holding AVALON TECHNOLOGIES LTD or generate 45.68% return on investment over 90 days.

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

Transport of  vs.  AVALON TECHNOLOGIES LTD

Transport

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transport of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Transport may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 13 (%) 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 Transport and AVALON TECHNOLOGIES

The main advantage of trading using opposite Transport and AVALON TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport 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 Transport of 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.