Correlation Between Alten SA and Wavestone

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

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

Diversification Opportunities for Alten SA and Wavestone

0.84

Correlation Coefficient

Alten SA  Wavestone

Very poor diversification

The 3 months correlation between Alten and Wavestone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alten SA and Wavestone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wavestone SA and Alten SA 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 Alten SA are associated (or correlated) with Wavestone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wavestone SA has no effect on the direction of Alten SA i.e., Alten SA and Wavestone go up and down completely randomly.

Pair Corralation between Alten SA and Wavestone

Assuming the 90 days trading horizon Alten SA is expected to generate 1.0 times more return on investment than Wavestone. However, Alten SA is 1.0 times less risky than Wavestone. It trades about -0.15 of its potential returns per unit of risk. Wavestone SA is currently generating about -0.15 per unit of risk. If you would invest  9,155  in Alten SA on September 4, 2024 and sell it today you would lose (1,675) from holding Alten SA or give up 18.3% of portfolio value over 90 days.

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

Alten SA  vs.  Wavestone SA

Alten SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alten SA 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 technical and fundamental 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.

Wavestone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wavestone SA 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 Alten SA and Wavestone

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

The idea behind Alten SA and Wavestone 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.