Correlation Between Alzinova and Leading Edge

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

By analyzing existing cross correlation between Alzinova AB and Leading Edge Materials, you can compare the effects of market volatilities on Alzinova and Leading Edge 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 Alzinova with a short position of Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alzinova and Leading Edge.

Diversification Opportunities for Alzinova and Leading Edge

-0.32

Correlation Coefficient

Alzinova  Leading Edge

Very good diversification

The 3 months correlation between Alzinova and Leading is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alzinova AB and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Alzinova 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 Alzinova AB are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Alzinova i.e., Alzinova and Leading Edge go up and down completely randomly.

Pair Corralation between Alzinova and Leading Edge

Assuming the 90 days trading horizon Alzinova AB is expected to generate 1.09 times more return on investment than Leading Edge. However, Alzinova is 1.09 times more volatile than Leading Edge Materials. It trades about 0.08 of its potential returns per unit of risk. Leading Edge Materials is currently generating about 0.01 per unit of risk. If you would invest  350.00  in Alzinova AB on September 4, 2024 and sell it today you would earn a total of  44.00  from holding Alzinova AB or generate 12.57% return on investment over 90 days.

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

Alzinova AB  vs.  Leading Edge Materials

Alzinova AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alzinova AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alzinova unveiled solid returns over the last few months and may actually be approaching a breakup point.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leading Edge is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alzinova and Leading Edge

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

The idea behind Alzinova AB and Leading Edge Materials 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.