Correlation Between Alumil Rom and Med Life

Can any of the company-specific risk be diversified away by investing in both Alumil Rom and Med Life 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 Alumil Rom and Med Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alumil Rom Industry and Med Life SA, you can compare the effects of market volatilities on Alumil Rom and Med Life 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 Alumil Rom with a short position of Med Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumil Rom and Med Life.

Diversification Opportunities for Alumil Rom and Med Life

0.66

Correlation Coefficient

Alumil Rom  Med Life

Poor diversification

The 3 months correlation between Alumil and Med is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alumil Rom Industry and Med Life SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Med Life SA and Alumil Rom 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 Alumil Rom Industry are associated (or correlated) with Med Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Med Life SA has no effect on the direction of Alumil Rom i.e., Alumil Rom and Med Life go up and down completely randomly.

Pair Corralation between Alumil Rom and Med Life

Assuming the 90 days trading horizon Alumil Rom Industry is expected to generate 0.99 times more return on investment than Med Life. However, Alumil Rom Industry is 1.01 times less risky than Med Life. It trades about 0.21 of its potential returns per unit of risk. Med Life SA is currently generating about 0.0 per unit of risk. If you would invest  243.00  in Alumil Rom Industry on September 29, 2024 and sell it today you would earn a total of  31.00  from holding Alumil Rom Industry or generate 12.76% return on investment over 90 days.

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

Alumil Rom Industry  vs.  Med Life SA

Alumil Rom Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumil Rom Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alumil Rom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Med Life SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Med Life SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Med Life is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alumil Rom and Med Life

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

The idea behind Alumil Rom Industry and Med Life SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.