Correlation Between Luxfer Holdings and AVALONBAY

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

By analyzing existing cross correlation between Luxfer Holdings PLC and AVALONBAY CMNTYS INC, you can compare the effects of market volatilities on Luxfer Holdings and AVALONBAY 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 Luxfer Holdings with a short position of AVALONBAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Luxfer Holdings and AVALONBAY.

Diversification Opportunities for Luxfer Holdings and AVALONBAY

-0.48

Correlation Coefficient

Luxfer Holdings  AVALONBAY

Very good diversification

The 3 months correlation between Luxfer and AVALONBAY is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC and AVALONBAY CMNTYS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALONBAY CMNTYS INC and Luxfer Holdings 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 Luxfer Holdings PLC are associated (or correlated) with AVALONBAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALONBAY CMNTYS INC has no effect on the direction of Luxfer Holdings i.e., Luxfer Holdings and AVALONBAY go up and down completely randomly.

Pair Corralation between Luxfer Holdings and AVALONBAY

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to generate 10.11 times more return on investment than AVALONBAY. However, Luxfer Holdings is 10.11 times more volatile than AVALONBAY CMNTYS INC. It trades about 0.14 of its potential returns per unit of risk. AVALONBAY CMNTYS INC is currently generating about -0.11 per unit of risk. If you would invest  1,141  in Luxfer Holdings PLC on September 3, 2024 and sell it today you would earn a total of  295.00  from holding Luxfer Holdings PLC or generate 25.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Luxfer Holdings PLC  vs.  AVALONBAY CMNTYS INC

Luxfer Holdings PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

AVALONBAY CMNTYS INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Luxfer Holdings and AVALONBAY

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

The idea behind Luxfer Holdings PLC and AVALONBAY CMNTYS INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.