Correlation Between Alma Media and Exel Composites

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

By analyzing existing cross correlation between Alma Media Oyj and Exel Composites Oyj, you can compare the effects of market volatilities on Alma Media and Exel Composites 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 Alma Media with a short position of Exel Composites. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alma Media and Exel Composites.

Diversification Opportunities for Alma Media and Exel Composites

-0.37

Correlation Coefficient

Alma Media  Exel Composites

Very good diversification

The 3 months correlation between Alma and Exel is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alma Media Oyj and Exel Composites Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exel Composites Oyj and Alma Media 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 Alma Media Oyj are associated (or correlated) with Exel Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exel Composites Oyj has no effect on the direction of Alma Media i.e., Alma Media and Exel Composites go up and down completely randomly.

Pair Corralation between Alma Media and Exel Composites

Assuming the 90 days trading horizon Alma Media Oyj is expected to generate 0.58 times more return on investment than Exel Composites. However, Alma Media Oyj is 1.72 times less risky than Exel Composites. It trades about 0.04 of its potential returns per unit of risk. Exel Composites Oyj is currently generating about -0.06 per unit of risk. If you would invest  1,115  in Alma Media Oyj on September 5, 2024 and sell it today you would earn a total of  35.00  from holding Alma Media Oyj or generate 3.14% return on investment over 90 days.

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

Alma Media Oyj  vs.  Exel Composites Oyj

Alma Media Oyj

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alma Media Oyj are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Alma Media is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Exel Composites Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exel Composites Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Alma Media and Exel Composites

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

The idea behind Alma Media Oyj and Exel Composites Oyj 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.