Correlation Between Alfa Financial and United States
Can any of the company-specific risk be diversified away by investing in both Alfa Financial and United States 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 Alfa Financial and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Financial Software and United States Steel, you can compare the effects of market volatilities on Alfa Financial and United States 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 Alfa Financial with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and United States.
Diversification Opportunities for Alfa Financial and United States
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alfa and United is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Alfa Financial i.e., Alfa Financial and United States go up and down completely randomly.
Pair Corralation between Alfa Financial and United States
Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 0.76 times more return on investment than United States. However, Alfa Financial Software is 1.32 times less risky than United States. It trades about 0.16 of its potential returns per unit of risk. United States Steel is currently generating about -0.17 per unit of risk. If you would invest 252.00 in Alfa Financial Software on September 13, 2024 and sell it today you would earn a total of 20.00 from holding Alfa Financial Software or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alfa Financial Software vs. United States Steel
Performance |
| Timeline |
| Alfa Financial Software |
| United States Steel |
Alfa Financial and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Financial and United States
The main advantage of trading using opposite Alfa Financial and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc |
| United States vs. ArcelorMittal | United States vs. NIPPON STEEL SPADR | United States vs. Reliance Steel Aluminum | United States vs. Superior Plus Corp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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