Correlation Between Associated Alcohols and State Trading

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

By analyzing existing cross correlation between Associated Alcohols Breweries and The State Trading, you can compare the effects of market volatilities on Associated Alcohols and State Trading 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 Associated Alcohols with a short position of State Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Alcohols and State Trading.

Diversification Opportunities for Associated Alcohols and State Trading

0.25

Correlation Coefficient

Associated Alcohols  State Trading

Modest diversification

The 3 months correlation between Associated and State is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Associated Alcohols Breweries and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading and Associated Alcohols 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 Associated Alcohols Breweries are associated (or correlated) with State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of Associated Alcohols i.e., Associated Alcohols and State Trading go up and down completely randomly.

Pair Corralation between Associated Alcohols and State Trading

Assuming the 90 days trading horizon Associated Alcohols Breweries is expected to generate 0.67 times more return on investment than State Trading. However, Associated Alcohols Breweries is 1.48 times less risky than State Trading. It trades about 0.05 of its potential returns per unit of risk. The State Trading is currently generating about -0.07 per unit of risk. If you would invest  89,835  in Associated Alcohols Breweries on September 2, 2024 and sell it today you would earn a total of  5,820  from holding Associated Alcohols Breweries or generate 6.48% return on investment over 90 days.

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

Associated Alcohols Breweries  vs.  The State Trading

Associated Alcohols

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, Associated Alcohols may actually be approaching a critical reversion point that can send shares even higher in January 2025.

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Associated Alcohols and State Trading

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

The idea behind Associated Alcohols Breweries and The State Trading 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.