Correlation Between ALK Abell and Erria AS
Can any of the company-specific risk be diversified away by investing in both ALK Abell and Erria AS 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 ALK Abell and Erria AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALK Abell AS and Erria AS, you can compare the effects of market volatilities on ALK Abell and Erria AS 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 ALK Abell with a short position of Erria AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALK Abell and Erria AS.
Diversification Opportunities for ALK Abell and Erria AS
Poor diversification
The 3 months correlation between ALK and Erria is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ALK Abell AS and Erria AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erria AS and ALK Abell 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 ALK Abell AS are associated (or correlated) with Erria AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erria AS has no effect on the direction of ALK Abell i.e., ALK Abell and Erria AS go up and down completely randomly.
Pair Corralation between ALK Abell and Erria AS
Assuming the 90 days trading horizon ALK Abell AS is expected to generate 0.75 times more return on investment than Erria AS. However, ALK Abell AS is 1.34 times less risky than Erria AS. It trades about 0.11 of its potential returns per unit of risk. Erria AS is currently generating about 0.0 per unit of risk. If you would invest 9,350 in ALK Abell AS on September 2, 2024 and sell it today you would earn a total of 6,850 from holding ALK Abell AS or generate 73.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALK Abell AS vs. Erria AS
Performance |
| Timeline |
| ALK Abell AS |
| Erria AS |
ALK Abell and Erria AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALK Abell and Erria AS
The main advantage of trading using opposite ALK Abell and Erria AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALK Abell position performs unexpectedly, Erria AS 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 Erria AS will offset losses from the drop in Erria AS's long position.The idea behind ALK Abell AS and Erria AS 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.| Erria AS vs. Scandinavian Tobacco Group | Erria AS vs. Jyske Bank AS | Erria AS vs. Dataproces Group AS | Erria AS vs. Spar Nord Bank |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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