Correlation Between ALi Corp and Castles Technology

Can any of the company-specific risk be diversified away by investing in both ALi Corp and Castles Technology 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 ALi Corp and Castles Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALi Corp and Castles Technology Co, you can compare the effects of market volatilities on ALi Corp and Castles Technology 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 ALi Corp with a short position of Castles Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALi Corp and Castles Technology.

Diversification Opportunities for ALi Corp and Castles Technology

-0.78

Correlation Coefficient

ALi Corp  Castles Technology

Pay attention - limited upside

The 3 months correlation between ALi and Castles is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ALi Corp and Castles Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castles Technology and ALi Corp 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 ALi Corp are associated (or correlated) with Castles Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castles Technology has no effect on the direction of ALi Corp i.e., ALi Corp and Castles Technology go up and down completely randomly.

Pair Corralation between ALi Corp and Castles Technology

Assuming the 90 days trading horizon ALi Corp is expected to generate 3.32 times more return on investment than Castles Technology. However, ALi Corp is 3.32 times more volatile than Castles Technology Co. It trades about 0.14 of its potential returns per unit of risk. Castles Technology Co is currently generating about -0.22 per unit of risk. If you would invest  1,995  in ALi Corp on September 25, 2024 and sell it today you would earn a total of  1,740  from holding ALi Corp or generate 87.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ALi Corp  vs.  Castles Technology Co

ALi Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALi Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Castles Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castles Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with ALi Corp and Castles Technology

The main advantage of trading using opposite ALi Corp and Castles Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALi Corp position performs unexpectedly, Castles Technology 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 Castles Technology will offset losses from the drop in Castles Technology's long position.

The idea behind ALi Corp and Castles Technology Co 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.