Correlation Between Associated British and Alfa Financial
Can any of the company-specific risk be diversified away by investing in both Associated British and Alfa Financial 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 Associated British and Alfa Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Alfa Financial Software, you can compare the effects of market volatilities on Associated British and Alfa Financial 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 Associated British with a short position of Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Alfa Financial.
Diversification Opportunities for Associated British and Alfa Financial
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Associated and Alfa is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software and Associated British 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 Associated British Foods are associated (or correlated) with Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of Associated British i.e., Associated British and Alfa Financial go up and down completely randomly.
Pair Corralation between Associated British and Alfa Financial
Assuming the 90 days trading horizon Associated British is expected to generate 1.5 times less return on investment than Alfa Financial. But when comparing it to its historical volatility, Associated British Foods is 1.81 times less risky than Alfa Financial. It trades about 0.06 of its potential returns per unit of risk. Alfa Financial Software is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,674 in Alfa Financial Software on August 30, 2024 and sell it today you would earn a total of 7,926 from holding Alfa Financial Software or generate 54.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Alfa Financial Software
Performance |
| Timeline |
| Associated British Foods |
| Alfa Financial Software |
Associated British and Alfa Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Alfa Financial
The main advantage of trading using opposite Associated British and Alfa Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Alfa Financial 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 Alfa Financial will offset losses from the drop in Alfa Financial's long position.| Associated British vs. Aurora Investment Trust | Associated British vs. New Residential Investment | Associated British vs. Oakley Capital Investments | Associated British vs. DXC Technology Co |
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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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