Correlation Between Alfen NV and ADS TEC

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

Diversification Opportunities for Alfen NV and ADS TEC

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alfen and ADS is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alfen NV and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and Alfen NV 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 Alfen NV are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of Alfen NV i.e., Alfen NV and ADS TEC go up and down completely randomly.

Pair Corralation between Alfen NV and ADS TEC

Assuming the 90 days horizon Alfen NV is expected to under-perform the ADS TEC. But the otc stock apears to be less risky and, when comparing its historical volatility, Alfen NV is 35.42 times less risky than ADS TEC. The otc stock trades about -0.13 of its potential returns per unit of risk. The ADS TEC ENERGY PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  222.00  in ADS TEC ENERGY PLC on August 28, 2024 and sell it today you would earn a total of  99.00  from holding ADS TEC ENERGY PLC or generate 44.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy92.0%
ValuesDaily Returns

Alfen NV  vs.  ADS TEC ENERGY PLC

 Performance 
       Timeline  
Alfen NV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
ADS TEC ENERGY 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ADS TEC ENERGY PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, ADS TEC showed solid returns over the last few months and may actually be approaching a breakup point.

Alfen NV and ADS TEC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alfen NV and ADS TEC

The main advantage of trading using opposite Alfen NV and ADS TEC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfen NV position performs unexpectedly, ADS TEC 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 ADS TEC will offset losses from the drop in ADS TEC's long position.
The idea behind Alfen NV and ADS TEC ENERGY PLC 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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