Correlation Between ALM Equity and EEducation Albert

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

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

Diversification Opportunities for ALM Equity and EEducation Albert

0.73

Correlation Coefficient

ALM Equity  EEducation Albert

Poor diversification

The 3 months correlation between ALM and EEducation is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and eEducation Albert AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eEducation Albert and ALM Equity 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 ALM Equity AB are associated (or correlated) with EEducation Albert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eEducation Albert has no effect on the direction of ALM Equity i.e., ALM Equity and EEducation Albert go up and down completely randomly.

Pair Corralation between ALM Equity and EEducation Albert

Assuming the 90 days trading horizon ALM Equity AB is expected to generate 0.32 times more return on investment than EEducation Albert. However, ALM Equity AB is 3.16 times less risky than EEducation Albert. It trades about -0.14 of its potential returns per unit of risk. eEducation Albert AB is currently generating about -0.12 per unit of risk. If you would invest  9,040  in ALM Equity AB on September 13, 2024 and sell it today you would lose (470.00) from holding ALM Equity AB or give up 5.2% of portfolio value over 90 days.

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

ALM Equity AB  vs.  eEducation Albert AB

ALM Equity AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALM Equity AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

eEducation Albert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eEducation Albert AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ALM Equity and EEducation Albert

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

The idea behind ALM Equity AB and eEducation Albert 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.