Correlation Between Alliance Trust and Future Metals
Can any of the company-specific risk be diversified away by investing in both Alliance Trust and Future Metals 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 Alliance Trust and Future Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Trust PLC and Future Metals NL, you can compare the effects of market volatilities on Alliance Trust and Future Metals 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 Alliance Trust with a short position of Future Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Trust and Future Metals.
Diversification Opportunities for Alliance Trust and Future Metals
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alliance and Future is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Trust PLC and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL and Alliance Trust 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 Alliance Trust PLC are associated (or correlated) with Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Alliance Trust i.e., Alliance Trust and Future Metals go up and down completely randomly.
Pair Corralation between Alliance Trust and Future Metals
Assuming the 90 days trading horizon Alliance Trust PLC is expected to generate 0.24 times more return on investment than Future Metals. However, Alliance Trust PLC is 4.15 times less risky than Future Metals. It trades about 0.37 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.29 per unit of risk. If you would invest 121,200 in Alliance Trust PLC on September 5, 2024 and sell it today you would earn a total of 6,800 from holding Alliance Trust PLC or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 78.26% |
| Values | Daily Returns |
Alliance Trust PLC vs. Future Metals NL
Performance |
| Timeline |
| Alliance Trust PLC |
| Future Metals NL |
Alliance Trust and Future Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Trust and Future Metals
The main advantage of trading using opposite Alliance Trust and Future Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Trust position performs unexpectedly, Future Metals 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 Future Metals will offset losses from the drop in Future Metals' long position.| Alliance Trust vs. Future Metals NL | Alliance Trust vs. Panther Metals PLC | Alliance Trust vs. Hollywood Bowl Group | Alliance Trust vs. LBG Media PLC |
| Future Metals vs. Microchip Technology | Future Metals vs. Silvercorp Metals | Future Metals vs. Celebrus Technologies plc | Future Metals vs. DXC Technology Co |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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