Correlation Between CSB Bank and Avonmore Capital

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

By analyzing existing cross correlation between CSB Bank Limited and Avonmore Capital Management, you can compare the effects of market volatilities on CSB Bank and Avonmore Capital 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 CSB Bank with a short position of Avonmore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSB Bank and Avonmore Capital.

Diversification Opportunities for CSB Bank and Avonmore Capital

-0.08

Correlation Coefficient

CSB Bank  Avonmore Capital

Good diversification

The 3 months correlation between CSB and Avonmore is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CSB Bank Limited and Avonmore Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avonmore Capital Man and CSB Bank 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 CSB Bank Limited are associated (or correlated) with Avonmore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avonmore Capital Man has no effect on the direction of CSB Bank i.e., CSB Bank and Avonmore Capital go up and down completely randomly.

Pair Corralation between CSB Bank and Avonmore Capital

Assuming the 90 days trading horizon CSB Bank Limited is expected to generate 0.47 times more return on investment than Avonmore Capital. However, CSB Bank Limited is 2.15 times less risky than Avonmore Capital. It trades about 0.14 of its potential returns per unit of risk. Avonmore Capital Management is currently generating about -0.06 per unit of risk. If you would invest  30,875  in CSB Bank Limited on September 28, 2024 and sell it today you would earn a total of  1,770  from holding CSB Bank Limited or generate 5.73% return on investment over 90 days.

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

CSB Bank Limited  vs.  Avonmore Capital Management

CSB Bank Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CSB Bank Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, CSB Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Avonmore Capital Man

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avonmore Capital Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Avonmore Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSB Bank and Avonmore Capital

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

The idea behind CSB Bank Limited and Avonmore Capital Management 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.