Correlation Between Altarea SCA and Memscap Regpt

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

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

Diversification Opportunities for Altarea SCA and Memscap Regpt

0.54

Correlation Coefficient

Altarea SCA  Memscap Regpt

Very weak diversification

The 3 months correlation between Altarea and Memscap is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Altarea SCA and Memscap Regpt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Memscap Regpt and Altarea SCA 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 Altarea SCA are associated (or correlated) with Memscap Regpt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Memscap Regpt has no effect on the direction of Altarea SCA i.e., Altarea SCA and Memscap Regpt go up and down completely randomly.

Pair Corralation between Altarea SCA and Memscap Regpt

Assuming the 90 days trading horizon Altarea SCA is expected to generate 0.53 times more return on investment than Memscap Regpt. However, Altarea SCA is 1.89 times less risky than Memscap Regpt. It trades about -0.02 of its potential returns per unit of risk. Memscap Regpt is currently generating about -0.3 per unit of risk. If you would invest  10,000  in Altarea SCA on September 3, 2024 and sell it today you would lose (360.00) from holding Altarea SCA or give up 3.6% of portfolio value over 90 days.

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

Altarea SCA  vs.  Memscap Regpt

Altarea SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Memscap Regpt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Memscap Regpt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators 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 Altarea SCA and Memscap Regpt

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

The idea behind Altarea SCA and Memscap Regpt 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.