Correlation Between ALM Equity and Absolent Group
Can any of the company-specific risk be diversified away by investing in both ALM Equity and Absolent 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 ALM Equity and Absolent Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALM Equity AB and Absolent Group AB, you can compare the effects of market volatilities on ALM Equity and Absolent 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 ALM Equity with a short position of Absolent Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALM Equity and Absolent Group.
Diversification Opportunities for ALM Equity and Absolent Group
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ALM and Absolent is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Absolent Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolent Group AB and ALM Equity 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 ALM Equity AB are associated (or correlated) with Absolent Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolent Group AB has no effect on the direction of ALM Equity i.e., ALM Equity and Absolent Group go up and down completely randomly.
Pair Corralation between ALM Equity and Absolent Group
Assuming the 90 days trading horizon ALM Equity AB is expected to generate 1.14 times more return on investment than Absolent Group. However, ALM Equity is 1.14 times more volatile than Absolent Group AB. It trades about -0.05 of its potential returns per unit of risk. Absolent Group AB is currently generating about -0.16 per unit of risk. If you would invest 20,200 in ALM Equity AB on September 3, 2024 and sell it today you would lose (3,300) from holding ALM Equity AB or give up 16.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ALM Equity AB vs. Absolent Group AB
Performance |
| Timeline |
| ALM Equity AB |
| Absolent Group AB |
ALM Equity and Absolent Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALM Equity and Absolent Group
The main advantage of trading using opposite ALM Equity and Absolent Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALM Equity position performs unexpectedly, Absolent 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 Absolent Group will offset losses from the drop in Absolent Group's long position.| ALM Equity vs. ALM Equity AB | ALM Equity vs. Bufab Holding AB | ALM Equity vs. Atrium Ljungberg AB | ALM Equity vs. Bravida Holding AB |
| Absolent Group vs. Beijer Ref AB | Absolent Group vs. Indutrade AB | Absolent Group vs. Addtech AB | Absolent Group vs. Nolato AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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