Correlation Between London Security and Alfa Financial
Can any of the company-specific risk be diversified away by investing in both London Security and Alfa Financial 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 London Security and Alfa Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Alfa Financial Software, you can compare the effects of market volatilities on London Security and Alfa Financial 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 London Security with a short position of Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Alfa Financial.
Diversification Opportunities for London Security and Alfa Financial
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between London and Alfa is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software and London Security 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 London Security Plc are associated (or correlated) with Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of London Security i.e., London Security and Alfa Financial go up and down completely randomly.
Pair Corralation between London Security and Alfa Financial
Assuming the 90 days trading horizon London Security Plc is expected to under-perform the Alfa Financial. But the stock apears to be less risky and, when comparing its historical volatility, London Security Plc is 1.15 times less risky than Alfa Financial. The stock trades about -0.2 of its potential returns per unit of risk. The Alfa Financial Software is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 21,650 in Alfa Financial Software on August 28, 2024 and sell it today you would earn a total of 50.00 from holding Alfa Financial Software or generate 0.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Alfa Financial Software
Performance |
| Timeline |
| London Security Plc |
| Alfa Financial Software |
London Security and Alfa Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Alfa Financial
The main advantage of trading using opposite London Security and Alfa Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Alfa Financial 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 Financial will offset losses from the drop in Alfa Financial's long position.| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Toyota Motor Corp | London Security vs. Hon Hai Precision |
| Alfa Financial vs. Uniper SE | Alfa Financial vs. London Security Plc | Alfa Financial vs. SURETRACK MON | Alfa Financial vs. Ikigai Ventures |
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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