Correlation Between VCI Global and Avalon Holdings

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

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

Diversification Opportunities for VCI Global and Avalon Holdings

-0.17

Correlation Coefficient

VCI Global  Avalon Holdings

Good diversification

The 3 months correlation between VCI and Avalon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding VCI Global Limited and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and VCI Global 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 VCI Global Limited 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 VCI Global i.e., VCI Global and Avalon Holdings go up and down completely randomly.

Pair Corralation between VCI Global and Avalon Holdings

Given the investment horizon of 90 days VCI Global Limited is expected to generate 8.93 times more return on investment than Avalon Holdings. However, VCI Global is 8.93 times more volatile than Avalon Holdings. It trades about 0.01 of its potential returns per unit of risk. Avalon Holdings is currently generating about 0.03 per unit of risk. If you would invest  20,824  in VCI Global Limited on December 2, 2024 and sell it today you would lose (20,756) from holding VCI Global Limited or give up 99.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.13%
Values	Daily Returns

VCI Global Limited  vs.  Avalon Holdings

VCI Global Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days VCI Global Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Avalon Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avalon Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Avalon Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with VCI Global and Avalon Holdings

The main advantage of trading using opposite VCI Global and Avalon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VCI Global 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 VCI Global Limited 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.