Correlation Between Alarm Holdings and Bentley Systems

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

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

Diversification Opportunities for Alarm Holdings and Bentley Systems

-0.18

Correlation Coefficient

Alarm Holdings  Bentley Systems

Good diversification

The 3 months correlation between Alarm and Bentley is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Alarm Holdings and Bentley Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bentley Systems and Alarm Holdings 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 Alarm Holdings are associated (or correlated) with Bentley Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bentley Systems has no effect on the direction of Alarm Holdings i.e., Alarm Holdings and Bentley Systems go up and down completely randomly.

Pair Corralation between Alarm Holdings and Bentley Systems

Given the investment horizon of 90 days Alarm Holdings is expected to generate 1.41 times more return on investment than Bentley Systems. However, Alarm Holdings is 1.41 times more volatile than Bentley Systems. It trades about 0.08 of its potential returns per unit of risk. Bentley Systems is currently generating about 0.02 per unit of risk. If you would invest  5,819  in Alarm Holdings on August 31, 2024 and sell it today you would earn a total of  598.00  from holding Alarm Holdings or generate 10.28% return on investment over 90 days.

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

Alarm Holdings  vs.  Bentley Systems

Alarm Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alarm Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alarm Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Bentley Systems

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bentley Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Bentley Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alarm Holdings and Bentley Systems

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

The idea behind Alarm Holdings and Bentley Systems 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.