Correlation Between Quad Graphics and Avalon Holdings
Can any of the company-specific risk be diversified away by investing in both Quad Graphics and Avalon Holdings 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 Quad Graphics and Avalon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quad Graphics and Avalon Holdings, you can compare the effects of market volatilities on Quad Graphics and Avalon Holdings 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 Quad Graphics with a short position of Avalon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quad Graphics and Avalon Holdings.
Diversification Opportunities for Quad Graphics and Avalon Holdings
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Quad and Avalon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Quad Graphics and Avalon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalon Holdings and Quad Graphics 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 Quad Graphics are associated (or correlated) with Avalon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalon Holdings has no effect on the direction of Quad Graphics i.e., Quad Graphics and Avalon Holdings go up and down completely randomly.
Pair Corralation between Quad Graphics and Avalon Holdings
Given the investment horizon of 90 days Quad Graphics is expected to under-perform the Avalon Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Quad Graphics is 1.54 times less risky than Avalon Holdings. The stock trades about -0.07 of its potential returns per unit of risk. The Avalon Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 242.00 in Avalon Holdings on February 21, 2024 and sell it today you would lose (2.51) from holding Avalon Holdings or give up 1.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Quad Graphics vs. Avalon Holdings
Performance |
Timeline |
Quad Graphics |
Avalon Holdings |
Quad Graphics and Avalon Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Quad Graphics and Avalon Holdings
The main advantage of trading using opposite Quad Graphics and Avalon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quad Graphics position performs unexpectedly, Avalon Holdings 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 Holdings will offset losses from the drop in Avalon Holdings' long position.Quad Graphics vs. Cass Information Systems | Quad Graphics vs. Civeo Corp | Quad Graphics vs. Network 1 Technologies | Quad Graphics vs. Maximus |
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Check out your portfolio center.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.
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