Correlation Between Alfa Laval and Concentric

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

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

Diversification Opportunities for Alfa Laval and Concentric

0.69

Correlation Coefficient

Alfa Laval  Concentric

Poor diversification

The 3 months correlation between Alfa and Concentric is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and Concentric AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concentric AB and Alfa Laval 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 Laval AB are associated (or correlated) with Concentric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concentric AB has no effect on the direction of Alfa Laval i.e., Alfa Laval and Concentric go up and down completely randomly.

Pair Corralation between Alfa Laval and Concentric

Assuming the 90 days trading horizon Alfa Laval AB is expected to generate 1.05 times more return on investment than Concentric. However, Alfa Laval is 1.05 times more volatile than Concentric AB. It trades about 0.1 of its potential returns per unit of risk. Concentric AB is currently generating about 0.03 per unit of risk. If you would invest  44,410  in Alfa Laval AB on September 4, 2024 and sell it today you would earn a total of  3,330  from holding Alfa Laval AB or generate 7.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.85%
Values	Daily Returns

Alfa Laval AB  vs.  Concentric AB

Alfa Laval AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Laval may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Concentric AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Concentric AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Concentric is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alfa Laval and Concentric

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

The idea behind Alfa Laval AB and Concentric AB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.