Correlation Between Aluminumof China and Avanos Medical

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

By analyzing existing cross correlation between Aluminum of and Avanos Medical, you can compare the effects of market volatilities on Aluminumof China and Avanos Medical 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 Aluminumof China with a short position of Avanos Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminumof China and Avanos Medical.

Diversification Opportunities for Aluminumof China and Avanos Medical

-0.15

Correlation Coefficient

Aluminumof China  Avanos Medical

Good diversification

The 3 months correlation between Aluminumof and Avanos is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Avanos Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanos Medical and Aluminumof China 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 Aluminum of are associated (or correlated) with Avanos Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanos Medical has no effect on the direction of Aluminumof China i.e., Aluminumof China and Avanos Medical go up and down completely randomly.

Pair Corralation between Aluminumof China and Avanos Medical

Assuming the 90 days horizon Aluminum of is expected to generate 1.42 times more return on investment than Avanos Medical. However, Aluminumof China is 1.42 times more volatile than Avanos Medical. It trades about 0.1 of its potential returns per unit of risk. Avanos Medical is currently generating about -0.06 per unit of risk. If you would invest  45.00  in Aluminum of on September 4, 2024 and sell it today you would earn a total of  11.00  from holding Aluminum of or generate 24.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aluminum of  vs.  Avanos Medical

Aluminumof China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aluminum of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aluminumof China reported solid returns over the last few months and may actually be approaching a breakup point.

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aluminumof China and Avanos Medical

The main advantage of trading using opposite Aluminumof China and Avanos Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminumof China position performs unexpectedly, Avanos Medical 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 Avanos Medical will offset losses from the drop in Avanos Medical's long position.

The idea behind Aluminum of and Avanos Medical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.