Correlation Between Century Wind and AVY Precision
Can any of the company-specific risk be diversified away by investing in both Century Wind and AVY Precision 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 Century Wind and AVY Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Wind Power and AVY Precision Technology, you can compare the effects of market volatilities on Century Wind and AVY Precision 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 Century Wind with a short position of AVY Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Wind and AVY Precision.
Diversification Opportunities for Century Wind and AVY Precision
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Century and AVY is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Century Wind Power and AVY Precision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVY Precision Technology and Century Wind 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 Century Wind Power are associated (or correlated) with AVY Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVY Precision Technology has no effect on the direction of Century Wind i.e., Century Wind and AVY Precision go up and down completely randomly.
Pair Corralation between Century Wind and AVY Precision
Assuming the 90 days trading horizon Century Wind is expected to generate 1.02 times less return on investment than AVY Precision. But when comparing it to its historical volatility, Century Wind Power is 1.15 times less risky than AVY Precision. It trades about 0.03 of its potential returns per unit of risk. AVY Precision Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,520 in AVY Precision Technology on September 4, 2024 and sell it today you would earn a total of 215.00 from holding AVY Precision Technology or generate 8.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Wind Power vs. AVY Precision Technology
Performance |
| Timeline |
| Century Wind Power |
| AVY Precision Technology |
Century Wind and AVY Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Wind and AVY Precision
The main advantage of trading using opposite Century Wind and AVY Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Wind position performs unexpectedly, AVY Precision 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 AVY Precision will offset losses from the drop in AVY Precision's long position.| Century Wind vs. Cleanaway Co | Century Wind vs. Simple Mart Retail | Century Wind vs. WINSON Machinery Co | Century Wind vs. ReaLy Development Construction |
| AVY Precision vs. Ability Enterprise Co | AVY Precision vs. XAC Automation | AVY Precision vs. Cheng Fwa Industrial | AVY Precision vs. Kaulin Mfg |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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