Correlation Between State Bank and AVALON TECHNOLOGIES

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

By analyzing existing cross correlation between State Bank of and AVALON TECHNOLOGIES LTD, you can compare the effects of market volatilities on State Bank and AVALON TECHNOLOGIES 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 State Bank with a short position of AVALON TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and AVALON TECHNOLOGIES.

Diversification Opportunities for State Bank and AVALON TECHNOLOGIES

0.45

Correlation Coefficient

State Bank  AVALON TECHNOLOGIES

Very weak diversification

The 3 months correlation between State and AVALON is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and AVALON TECHNOLOGIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALON TECHNOLOGIES LTD and State 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 State Bank of are associated (or correlated) with AVALON TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALON TECHNOLOGIES LTD has no effect on the direction of State Bank i.e., State Bank and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between State Bank and AVALON TECHNOLOGIES

Assuming the 90 days trading horizon State Bank is expected to generate 26.18 times less return on investment than AVALON TECHNOLOGIES. But when comparing it to its historical volatility, State Bank of is 2.61 times less risky than AVALON TECHNOLOGIES. It trades about 0.02 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  52,100  in AVALON TECHNOLOGIES LTD on September 3, 2024 and sell it today you would earn a total of  44,390  from holding AVALON TECHNOLOGIES LTD or generate 85.2% return on investment over 90 days.

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

State Bank of  vs.  AVALON TECHNOLOGIES LTD

State Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, State Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Bank and AVALON TECHNOLOGIES

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

The idea behind State Bank of and AVALON TECHNOLOGIES LTD 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.