Correlation Between ALM ES and IE00B0H4TS55

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Can any of the company-specific risk be diversified away by investing in both ALM ES and IE00B0H4TS55 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 ALM ES and IE00B0H4TS55 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALM ES Actions and IE00B0H4TS55, you can compare the effects of market volatilities on ALM ES and IE00B0H4TS55 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 ALM ES with a short position of IE00B0H4TS55. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALM ES and IE00B0H4TS55.

Diversification Opportunities for ALM ES and IE00B0H4TS55

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between ALM and IE00B0H4TS55 is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ALM ES Actions and IE00B0H4TS55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IE00B0H4TS55 and ALM ES 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 ALM ES Actions are associated (or correlated) with IE00B0H4TS55. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IE00B0H4TS55 has no effect on the direction of ALM ES i.e., ALM ES and IE00B0H4TS55 go up and down completely randomly.

Pair Corralation between ALM ES and IE00B0H4TS55

Assuming the 90 days trading horizon ALM ES Actions is expected to under-perform the IE00B0H4TS55. In addition to that, ALM ES is 2.71 times more volatile than IE00B0H4TS55. It trades about -0.3 of its total potential returns per unit of risk. IE00B0H4TS55 is currently generating about -0.33 per unit of volatility. If you would invest  18,703  in IE00B0H4TS55 on October 12, 2024 and sell it today you would lose (198.00) from holding IE00B0H4TS55 or give up 1.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy87.5%
ValuesDaily Returns

ALM ES Actions  vs.  IE00B0H4TS55

 Performance 
       Timeline  
ALM ES Actions 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Insignificant
Over the last 90 days ALM ES Actions has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, ALM ES is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
IE00B0H4TS55 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days IE00B0H4TS55 has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, IE00B0H4TS55 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ALM ES and IE00B0H4TS55 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ALM ES and IE00B0H4TS55

The main advantage of trading using opposite ALM ES and IE00B0H4TS55 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALM ES position performs unexpectedly, IE00B0H4TS55 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 IE00B0H4TS55 will offset losses from the drop in IE00B0H4TS55's long position.
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The idea behind ALM ES Actions and IE00B0H4TS55 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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