Correlation Between Alfen NV and OSRAM LICHT

Can any of the company-specific risk be diversified away by investing in both Alfen NV and OSRAM LICHT 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 Alfen NV and OSRAM LICHT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfen NV and OSRAM LICHT N, you can compare the effects of market volatilities on Alfen NV and OSRAM LICHT 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 Alfen NV with a short position of OSRAM LICHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfen NV and OSRAM LICHT.

Diversification Opportunities for Alfen NV and OSRAM LICHT

-0.62

Correlation Coefficient

Alfen NV  OSRAM LICHT

Excellent diversification

The 3 months correlation between Alfen and OSRAM is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alfen NV and OSRAM LICHT N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSRAM LICHT N and Alfen NV 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 Alfen NV are associated (or correlated) with OSRAM LICHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSRAM LICHT N has no effect on the direction of Alfen NV i.e., Alfen NV and OSRAM LICHT go up and down completely randomly.

Pair Corralation between Alfen NV and OSRAM LICHT

Assuming the 90 days horizon Alfen NV is expected to under-perform the OSRAM LICHT. In addition to that, Alfen NV is 12.38 times more volatile than OSRAM LICHT N. It trades about -0.03 of its total potential returns per unit of risk. OSRAM LICHT N is currently generating about 0.22 per unit of volatility. If you would invest  5,020  in OSRAM LICHT N on September 23, 2024 and sell it today you would earn a total of  160.00  from holding OSRAM LICHT N or generate 3.19% return on investment over 90 days.

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

Alfen NV  vs.  OSRAM LICHT N

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alfen NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

OSRAM LICHT N

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in OSRAM LICHT N are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, OSRAM LICHT is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alfen NV and OSRAM LICHT

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

The idea behind Alfen NV and OSRAM LICHT N 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.