Correlation Between AVALON TECHNOLOGIES and Dow Jones
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By analyzing existing cross correlation between AVALON TECHNOLOGIES LTD and Dow Jones Industrial, you can compare the effects of market volatilities on AVALON TECHNOLOGIES and Dow Jones 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 AVALON TECHNOLOGIES with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVALON TECHNOLOGIES and Dow Jones.
Diversification Opportunities for AVALON TECHNOLOGIES and Dow Jones
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AVALON and Dow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AVALON TECHNOLOGIES LTD and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and AVALON TECHNOLOGIES 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 AVALON TECHNOLOGIES LTD are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of AVALON TECHNOLOGIES i.e., AVALON TECHNOLOGIES and Dow Jones go up and down completely randomly.
Pair Corralation between AVALON TECHNOLOGIES and Dow Jones
Assuming the 90 days trading horizon AVALON TECHNOLOGIES LTD is expected to generate 5.7 times more return on investment than Dow Jones. However, AVALON TECHNOLOGIES is 5.7 times more volatile than Dow Jones Industrial. It trades about 0.18 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 per unit of risk. If you would invest 62,965 in AVALON TECHNOLOGIES LTD on August 25, 2024 and sell it today you would earn a total of 22,720 from holding AVALON TECHNOLOGIES LTD or generate 36.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.56% |
| Values | Daily Returns |
AVALON TECHNOLOGIES LTD vs. Dow Jones Industrial
Performance |
| Timeline |
AVALON TECHNOLOGIES and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
AVALON TECHNOLOGIES LTD
Pair trading matchups for AVALON TECHNOLOGIES
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with AVALON TECHNOLOGIES and Dow Jones
The main advantage of trading using opposite AVALON TECHNOLOGIES and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVALON TECHNOLOGIES position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.The idea behind AVALON TECHNOLOGIES LTD and Dow Jones Industrial 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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