Correlation Between Alfa Financial and Central Asia

Can any of the company-specific risk be diversified away by investing in both Alfa Financial and Central Asia 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 Alfa Financial and Central Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfa Financial Software and Central Asia Metals, you can compare the effects of market volatilities on Alfa Financial and Central Asia 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 Alfa Financial with a short position of Central Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and Central Asia.

Diversification Opportunities for Alfa Financial and Central Asia

-0.75

Correlation Coefficient

Alfa Financial  Central Asia

Pay attention - limited upside

The 3 months correlation between Alfa and Central is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Alfa Financial i.e., Alfa Financial and Central Asia go up and down completely randomly.

Pair Corralation between Alfa Financial and Central Asia

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 1.42 times more return on investment than Central Asia. However, Alfa Financial is 1.42 times more volatile than Central Asia Metals. It trades about 0.07 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.23 per unit of risk. If you would invest  20,000  in Alfa Financial Software on September 26, 2024 and sell it today you would earn a total of  1,500  from holding Alfa Financial Software or generate 7.5% return on investment over 90 days.

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

Alfa Financial Software  vs.  Central Asia Metals

Alfa Financial Software

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alfa Financial and Central Asia

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

The idea behind Alfa Financial Software and Central Asia Metals 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.