Correlation Between Alfen NV and YASKAWA ELEC

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

By analyzing existing cross correlation between Alfen NV and YASKAWA ELEC UNSP, you can compare the effects of market volatilities on Alfen NV and YASKAWA ELEC 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 YASKAWA ELEC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfen NV and YASKAWA ELEC.

Diversification Opportunities for Alfen NV and YASKAWA ELEC

0.6

Correlation Coefficient

Alfen NV  YASKAWA ELEC

Poor diversification

The 3 months correlation between Alfen and YASKAWA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alfen NV and YASKAWA ELEC UNSP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YASKAWA ELEC UNSP 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 YASKAWA ELEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YASKAWA ELEC UNSP has no effect on the direction of Alfen NV i.e., Alfen NV and YASKAWA ELEC go up and down completely randomly.

Pair Corralation between Alfen NV and YASKAWA ELEC

Assuming the 90 days horizon Alfen NV is expected to generate 1.42 times more return on investment than YASKAWA ELEC. However, Alfen NV is 1.42 times more volatile than YASKAWA ELEC UNSP. It trades about -0.03 of its potential returns per unit of risk. YASKAWA ELEC UNSP is currently generating about -0.11 per unit of risk. If you would invest  1,212  in Alfen NV on September 23, 2024 and sell it today you would lose (98.00) from holding Alfen NV or give up 8.09% of portfolio value over 90 days.

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

Alfen NV  vs.  YASKAWA ELEC UNSP

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.

YASKAWA ELEC UNSP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YASKAWA ELEC UNSP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alfen NV and YASKAWA ELEC

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

The idea behind Alfen NV and YASKAWA ELEC UNSP 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 Global Correlations module to find global opportunities by holding instruments from different markets.