Correlation Between Evolution and Alfa Laval
Can any of the company-specific risk be diversified away by investing in both Evolution and Alfa Laval 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 Evolution and Alfa Laval into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evolution AB and Alfa Laval AB, you can compare the effects of market volatilities on Evolution and Alfa Laval 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 Evolution with a short position of Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution and Alfa Laval.
Diversification Opportunities for Evolution and Alfa Laval
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Evolution and Alfa is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and Evolution 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 Evolution AB are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of Evolution i.e., Evolution and Alfa Laval go up and down completely randomly.
Pair Corralation between Evolution and Alfa Laval
Assuming the 90 days trading horizon Evolution AB is expected to under-perform the Alfa Laval. But the stock apears to be less risky and, when comparing its historical volatility, Evolution AB is 1.18 times less risky than Alfa Laval. The stock trades about -0.25 of its potential returns per unit of risk. The Alfa Laval AB is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 49,340 in Alfa Laval AB on August 27, 2024 and sell it today you would lose (1,800) from holding Alfa Laval AB or give up 3.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evolution AB vs. Alfa Laval AB
Performance |
| Timeline |
| Evolution AB |
| Alfa Laval AB |
Evolution and Alfa Laval Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evolution and Alfa Laval
The main advantage of trading using opposite Evolution and Alfa Laval positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution position performs unexpectedly, Alfa Laval 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 Alfa Laval will offset losses from the drop in Alfa Laval's long position.| Evolution vs. XMReality AB | Evolution vs. Enersize Oy | Evolution vs. Mavshack publ AB | Evolution vs. Serstech AB |
| Alfa Laval vs. Addtech AB | Alfa Laval vs. Teqnion AB | Alfa Laval vs. Vitec Software Group | Alfa Laval vs. Lagercrantz Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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