Correlation Between Alfa Laval and UOL Group
Can any of the company-specific risk be diversified away by investing in both Alfa Laval and UOL Group 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 Laval and UOL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Laval AB and UOL Group Ltd, you can compare the effects of market volatilities on Alfa Laval and UOL Group 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 Laval with a short position of UOL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Laval and UOL Group.
Diversification Opportunities for Alfa Laval and UOL Group
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alfa and UOL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and UOL Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOL Group and Alfa Laval 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 Laval AB are associated (or correlated) with UOL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOL Group has no effect on the direction of Alfa Laval i.e., Alfa Laval and UOL Group go up and down completely randomly.
Pair Corralation between Alfa Laval and UOL Group
Assuming the 90 days horizon Alfa Laval AB is expected to generate 1.04 times more return on investment than UOL Group. However, Alfa Laval is 1.04 times more volatile than UOL Group Ltd. It trades about 0.03 of its potential returns per unit of risk. UOL Group Ltd is currently generating about -0.03 per unit of risk. If you would invest 3,644 in Alfa Laval AB on August 31, 2024 and sell it today you would earn a total of 605.00 from holding Alfa Laval AB or generate 16.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alfa Laval AB vs. UOL Group Ltd
Performance |
| Timeline |
| Alfa Laval AB |
| UOL Group |
Alfa Laval and UOL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Laval and UOL Group
The main advantage of trading using opposite Alfa Laval and UOL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Laval position performs unexpectedly, UOL Group 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 UOL Group will offset losses from the drop in UOL Group's long position.| Alfa Laval vs. GE Aerospace | Alfa Laval vs. Eaton PLC | Alfa Laval vs. Siemens AG Class | Alfa Laval vs. Schneider Electric SE |
| UOL Group vs. City Developments | UOL Group vs. United Overseas Bank | UOL Group vs. Wilmar International | UOL Group vs. Singapore Exchange Ltd |
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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