Correlation Between Avgol Industries and Petrochemical

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

By analyzing existing cross correlation between Avgol Industries 1953 and Petrochemical, you can compare the effects of market volatilities on Avgol Industries and Petrochemical 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 Avgol Industries with a short position of Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avgol Industries and Petrochemical.

Diversification Opportunities for Avgol Industries and Petrochemical

-0.23

Correlation Coefficient

Avgol Industries  Petrochemical

Very good diversification

The 3 months correlation between Avgol and Petrochemical is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Avgol Industries 1953 and Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrochemical and Avgol Industries 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 Avgol Industries 1953 are associated (or correlated) with Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrochemical has no effect on the direction of Avgol Industries i.e., Avgol Industries and Petrochemical go up and down completely randomly.

Pair Corralation between Avgol Industries and Petrochemical

Assuming the 90 days trading horizon Avgol Industries 1953 is expected to generate 1.05 times more return on investment than Petrochemical. However, Avgol Industries is 1.05 times more volatile than Petrochemical. It trades about 0.13 of its potential returns per unit of risk. Petrochemical is currently generating about 0.01 per unit of risk. If you would invest  12,800  in Avgol Industries 1953 on September 26, 2024 and sell it today you would earn a total of  2,070  from holding Avgol Industries 1953 or generate 16.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.83%
Values	Daily Returns

Avgol Industries 1953  vs.  Petrochemical

Avgol Industries 1953

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avgol Industries 1953 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avgol Industries sustained solid returns over the last few months and may actually be approaching a breakup point.

Petrochemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Petrochemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avgol Industries and Petrochemical

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

The idea behind Avgol Industries 1953 and Petrochemical 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 CEOs Directory module to screen CEOs from public companies around the world.