Correlation Between Alliance Select and Converge Information

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

By analyzing existing cross correlation between Alliance Select Foods and Converge Information Communications, you can compare the effects of market volatilities on Alliance Select and Converge Information 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 Alliance Select with a short position of Converge Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Select and Converge Information.

Diversification Opportunities for Alliance Select and Converge Information

0.09

Correlation Coefficient

Alliance Select  Converge Information

Significant diversification

The 3 months correlation between Alliance and Converge is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and Converge Information Communica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Information and Alliance Select 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 Alliance Select Foods are associated (or correlated) with Converge Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Information has no effect on the direction of Alliance Select i.e., Alliance Select and Converge Information go up and down completely randomly.

Pair Corralation between Alliance Select and Converge Information

Assuming the 90 days trading horizon Alliance Select Foods is expected to under-perform the Converge Information. In addition to that, Alliance Select is 1.2 times more volatile than Converge Information Communications. It trades about -0.07 of its total potential returns per unit of risk. Converge Information Communications is currently generating about 0.01 per unit of volatility. If you would invest  1,645  in Converge Information Communications on September 15, 2024 and sell it today you would lose (15.00) from holding Converge Information Communications or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	51.56%
Values	Daily Returns

Alliance Select Foods  vs.  Converge Information Communica

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Converge Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Converge Information is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alliance Select and Converge Information

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

The idea behind Alliance Select Foods and Converge Information Communications 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.