Correlation Between Alkali Metals and Computer Age

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

By analyzing existing cross correlation between Alkali Metals Limited and Computer Age Management, you can compare the effects of market volatilities on Alkali Metals and Computer Age 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 Alkali Metals with a short position of Computer Age. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkali Metals and Computer Age.

Diversification Opportunities for Alkali Metals and Computer Age

0.05

Correlation Coefficient

Alkali Metals  Computer Age

Significant diversification

The 3 months correlation between Alkali and Computer is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Alkali Metals Limited and Computer Age Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Age Management and Alkali Metals 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 Alkali Metals Limited are associated (or correlated) with Computer Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Age Management has no effect on the direction of Alkali Metals i.e., Alkali Metals and Computer Age go up and down completely randomly.

Pair Corralation between Alkali Metals and Computer Age

Assuming the 90 days trading horizon Alkali Metals Limited is expected to under-perform the Computer Age. But the stock apears to be less risky and, when comparing its historical volatility, Alkali Metals Limited is 1.11 times less risky than Computer Age. The stock trades about -0.03 of its potential returns per unit of risk. The Computer Age Management is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  459,706  in Computer Age Management on September 23, 2024 and sell it today you would earn a total of  35,394  from holding Computer Age Management or generate 7.7% return on investment over 90 days.

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

Alkali Metals Limited  vs.  Computer Age Management

Alkali Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkali Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alkali Metals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Computer Age Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alkali Metals and Computer Age

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

The idea behind Alkali Metals Limited and Computer Age Management 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.