Correlation Between Arca Continental and Alliance Global

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

By analyzing existing cross correlation between Arca Continental SAB and Alliance Global Group, you can compare the effects of market volatilities on Arca Continental and Alliance Global 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 Arca Continental with a short position of Alliance Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arca Continental and Alliance Global.

Diversification Opportunities for Arca Continental and Alliance Global

0.51

Correlation Coefficient

Arca Continental  Alliance Global

Very weak diversification

The 3 months correlation between Arca and Alliance is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Arca Continental SAB and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group and Arca Continental 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 Arca Continental SAB are associated (or correlated) with Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Arca Continental i.e., Arca Continental and Alliance Global go up and down completely randomly.

Pair Corralation between Arca Continental and Alliance Global

Assuming the 90 days horizon Arca Continental SAB is expected to generate 1.27 times more return on investment than Alliance Global. However, Arca Continental is 1.27 times more volatile than Alliance Global Group. It trades about -0.03 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.12 per unit of risk. If you would invest  930.00  in Arca Continental SAB on September 14, 2024 and sell it today you would lose (56.00) from holding Arca Continental SAB or give up 6.02% of portfolio value over 90 days.

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

Arca Continental SAB  vs.  Alliance Global Group

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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 Arca Continental and Alliance Global

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

The idea behind Arca Continental SAB and Alliance Global Group 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.