Correlation Between Alfa Financial and Metals Exploration

Can any of the company-specific risk be diversified away by investing in both Alfa Financial and Metals Exploration 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 Metals Exploration 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 Metals Exploration Plc, you can compare the effects of market volatilities on Alfa Financial and Metals Exploration 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 Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and Metals Exploration.

Diversification Opportunities for Alfa Financial and Metals Exploration

0.36

Correlation Coefficient

Alfa Financial  Metals Exploration

Weak diversification

The 3 months correlation between Alfa and Metals is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc 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 Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of Alfa Financial i.e., Alfa Financial and Metals Exploration go up and down completely randomly.

Pair Corralation between Alfa Financial and Metals Exploration

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 0.57 times more return on investment than Metals Exploration. However, Alfa Financial Software is 1.74 times less risky than Metals Exploration. It trades about 0.08 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about 0.02 per unit of risk. If you would invest  20,718  in Alfa Financial Software on September 13, 2024 and sell it today you would earn a total of  1,832  from holding Alfa Financial Software or generate 8.84% return on investment over 90 days.

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

Alfa Financial Software  vs.  Metals Exploration Plc

Alfa Financial Software

Risk-Adjusted Performance

5 of 100

Modest

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.

Metals Exploration Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Metals Exploration is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alfa Financial and Metals Exploration

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

The idea behind Alfa Financial Software and Metals Exploration Plc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.