Correlation Between Norstar and Avgol Industries

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

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

Diversification Opportunities for Norstar and Avgol Industries

0.82

Correlation Coefficient

Norstar  Avgol Industries

Very poor diversification

The 3 months correlation between Norstar and Avgol is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Norstar and Avgol Industries 1953 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avgol Industries 1953 and Norstar 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 Norstar are associated (or correlated) with Avgol Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avgol Industries 1953 has no effect on the direction of Norstar i.e., Norstar and Avgol Industries go up and down completely randomly.

Pair Corralation between Norstar and Avgol Industries

Assuming the 90 days trading horizon Norstar is expected to generate 0.77 times more return on investment than Avgol Industries. However, Norstar is 1.3 times less risky than Avgol Industries. It trades about -0.01 of its potential returns per unit of risk. Avgol Industries 1953 is currently generating about -0.08 per unit of risk. If you would invest  139,200  in Norstar on September 27, 2024 and sell it today you would lose (1,200) from holding Norstar or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Norstar  vs.  Avgol Industries 1953

Norstar

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Norstar are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Norstar sustained solid returns over the last few months and may actually be approaching a breakup point.

Avgol Industries 1953

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avgol Industries 1953 are ranked lower than 8 (%) 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.

Pair Trading with Norstar and Avgol Industries

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

The idea behind Norstar and Avgol Industries 1953 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.