Correlation Between Taoping and Alarum Technologies

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

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

Diversification Opportunities for Taoping and Alarum Technologies

-0.49

Correlation Coefficient

Taoping  Alarum Technologies

Very good diversification

The 3 months correlation between Taoping and Alarum is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Taoping and Alarum Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarum Technologies and Taoping 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 Taoping are associated (or correlated) with Alarum Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarum Technologies has no effect on the direction of Taoping i.e., Taoping and Alarum Technologies go up and down completely randomly.

Pair Corralation between Taoping and Alarum Technologies

Given the investment horizon of 90 days Taoping is expected to under-perform the Alarum Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Taoping is 1.04 times less risky than Alarum Technologies. The stock trades about -0.05 of its potential returns per unit of risk. The Alarum Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Alarum Technologies on September 1, 2024 and sell it today you would earn a total of  74.00  from holding Alarum Technologies or generate 6.22% return on investment over 90 days.

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

Taoping  vs.  Alarum Technologies

Taoping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taoping has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Alarum Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Alarum Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Taoping and Alarum Technologies

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

The idea behind Taoping and Alarum Technologies 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.