Correlation Between ALM Offensif and Nova Europe

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

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

Diversification Opportunities for ALM Offensif and Nova Europe

-0.66

Correlation Coefficient

ALM Offensif  Nova Europe

Excellent diversification

The 3 months correlation between ALM and Nova is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding ALM Offensif and Nova Europe ISR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Europe ISR and ALM Offensif 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 ALM Offensif are associated (or correlated) with Nova Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Europe ISR has no effect on the direction of ALM Offensif i.e., ALM Offensif and Nova Europe go up and down completely randomly.

Pair Corralation between ALM Offensif and Nova Europe

Assuming the 90 days trading horizon ALM Offensif is expected to generate 0.64 times more return on investment than Nova Europe. However, ALM Offensif is 1.57 times less risky than Nova Europe. It trades about 0.19 of its potential returns per unit of risk. Nova Europe ISR is currently generating about 0.08 per unit of risk. If you would invest  31,659  in ALM Offensif on September 22, 2024 and sell it today you would earn a total of  509.00  from holding ALM Offensif or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

ALM Offensif  vs.  Nova Europe ISR

ALM Offensif

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALM Offensif are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, ALM Offensif is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nova Europe ISR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Europe ISR has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Nova Europe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ALM Offensif and Nova Europe

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

The idea behind ALM Offensif and Nova Europe ISR 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 Transaction History module to view history of all your transactions and understand their impact on performance.