Correlation Between Commercial Metals and Avaya Holdings

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Can any of the company-specific risk be diversified away by investing in both Commercial Metals and Avaya 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 Commercial Metals and Avaya Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commercial Metals and Avaya Holdings Corp, you can compare the effects of market volatilities on Commercial Metals and Avaya 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 Commercial Metals with a short position of Avaya Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial Metals and Avaya Holdings.

Diversification Opportunities for Commercial Metals and Avaya Holdings

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Commercial and Avaya is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Metals and Avaya Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avaya Holdings Corp and Commercial Metals 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 Commercial Metals are associated (or correlated) with Avaya Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avaya Holdings Corp has no effect on the direction of Commercial Metals i.e., Commercial Metals and Avaya Holdings go up and down completely randomly.

Pair Corralation between Commercial Metals and Avaya Holdings

Considering the 90-day investment horizon Commercial Metals is expected to generate 0.21 times more return on investment than Avaya Holdings. However, Commercial Metals is 4.67 times less risky than Avaya Holdings. It trades about 0.22 of its potential returns per unit of risk. Avaya Holdings Corp is currently generating about -0.06 per unit of risk. If you would invest  4,570  in Commercial Metals on September 6, 2022 and sell it today you would earn a total of  389.00  from holding Commercial Metals or generate 8.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Commercial Metals  vs.  Avaya Holdings Corp

 Performance (%) 
       Timeline  
Commercial Metals 
Commercial Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Commercial Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Commercial Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Commercial Price Channel

Avaya Holdings Corp 
Avaya Performance
0 of 100
Over the last 90 days Avaya Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Avaya Price Channel

Commercial Metals and Avaya Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Commercial Metals and Avaya Holdings

The main advantage of trading using opposite Commercial Metals and Avaya Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Metals position performs unexpectedly, Avaya 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 Avaya Holdings will offset losses from the drop in Avaya Holdings' long position.
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The idea behind Commercial Metals and Avaya Holdings Corp 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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