Correlation Between Ambipar Emergency and Avalon Holdings

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

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

Diversification Opportunities for Ambipar Emergency and Avalon Holdings

0.16

Correlation Coefficient

Ambipar Emergency  Avalon Holdings

Average diversification

The 3 months correlation between Ambipar and Avalon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Ambipar Emergency Response and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and Ambipar Emergency 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 Ambipar Emergency Response 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 Ambipar Emergency i.e., Ambipar Emergency and Avalon Holdings go up and down completely randomly.

Pair Corralation between Ambipar Emergency and Avalon Holdings

Given the investment horizon of 90 days Ambipar Emergency Response is expected to generate 1.49 times more return on investment than Avalon Holdings. However, Ambipar Emergency is 1.49 times more volatile than Avalon Holdings. It trades about 0.1 of its potential returns per unit of risk. Avalon Holdings is currently generating about 0.11 per unit of risk. If you would invest  411.00  in Ambipar Emergency Response on September 3, 2024 and sell it today you would earn a total of  123.00  from holding Ambipar Emergency Response or generate 29.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ambipar Emergency Response  vs.  Avalon Holdings

Ambipar Emergency

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ambipar Emergency Response are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, Ambipar Emergency demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Avalon Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avalon Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Avalon Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambipar Emergency and Avalon Holdings

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

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.