Correlation Between Alstom SA and Maat Pharma
Can any of the company-specific risk be diversified away by investing in both Alstom SA and Maat Pharma 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 Alstom SA and Maat Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alstom SA and Maat Pharma SA, you can compare the effects of market volatilities on Alstom SA and Maat Pharma 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 Alstom SA with a short position of Maat Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alstom SA and Maat Pharma.
Diversification Opportunities for Alstom SA and Maat Pharma
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alstom and Maat is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alstom SA and Maat Pharma SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maat Pharma SA and Alstom SA 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 Alstom SA are associated (or correlated) with Maat Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maat Pharma SA has no effect on the direction of Alstom SA i.e., Alstom SA and Maat Pharma go up and down completely randomly.
Pair Corralation between Alstom SA and Maat Pharma
Assuming the 90 days trading horizon Alstom SA is expected to generate 1.29 times more return on investment than Maat Pharma. However, Alstom SA is 1.29 times more volatile than Maat Pharma SA. It trades about 0.08 of its potential returns per unit of risk. Maat Pharma SA is currently generating about 0.07 per unit of risk. If you would invest 2,029 in Alstom SA on August 27, 2024 and sell it today you would earn a total of 87.00 from holding Alstom SA or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alstom SA vs. Maat Pharma SA
Performance |
| Timeline |
| Alstom SA |
| Maat Pharma SA |
Alstom SA and Maat Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alstom SA and Maat Pharma
The main advantage of trading using opposite Alstom SA and Maat Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alstom SA position performs unexpectedly, Maat Pharma 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 Maat Pharma will offset losses from the drop in Maat Pharma's long position.The idea behind Alstom SA and Maat Pharma SA 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.| Maat Pharma vs. LVMH Mot Hennessy | Maat Pharma vs. LOreal SA | Maat Pharma vs. Hermes International SCA | Maat Pharma vs. Manitou BF SA |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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