Correlation Between ALFORMER Industrial and Avalue Technology
Can any of the company-specific risk be diversified away by investing in both ALFORMER Industrial and Avalue Technology 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 ALFORMER Industrial and Avalue Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALFORMER Industrial Co and Avalue Technology, you can compare the effects of market volatilities on ALFORMER Industrial and Avalue Technology 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 ALFORMER Industrial with a short position of Avalue Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALFORMER Industrial and Avalue Technology.
Diversification Opportunities for ALFORMER Industrial and Avalue Technology
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ALFORMER and Avalue is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding ALFORMER Industrial Co and Avalue Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalue Technology and ALFORMER Industrial 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 ALFORMER Industrial Co are associated (or correlated) with Avalue Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalue Technology has no effect on the direction of ALFORMER Industrial i.e., ALFORMER Industrial and Avalue Technology go up and down completely randomly.
Pair Corralation between ALFORMER Industrial and Avalue Technology
Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to generate 1.04 times more return on investment than Avalue Technology. However, ALFORMER Industrial is 1.04 times more volatile than Avalue Technology. It trades about 0.06 of its potential returns per unit of risk. Avalue Technology is currently generating about 0.05 per unit of risk. If you would invest 2,311 in ALFORMER Industrial Co on August 30, 2024 and sell it today you would earn a total of 1,624 from holding ALFORMER Industrial Co or generate 70.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALFORMER Industrial Co vs. Avalue Technology
Performance |
| Timeline |
| ALFORMER Industrial |
| Avalue Technology |
ALFORMER Industrial and Avalue Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALFORMER Industrial and Avalue Technology
The main advantage of trading using opposite ALFORMER Industrial and Avalue Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALFORMER Industrial position performs unexpectedly, Avalue Technology 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 Avalue Technology will offset losses from the drop in Avalue Technology's long position.The idea behind ALFORMER Industrial Co and Avalue Technology 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 the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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