Correlation Between ALM ES and ALM Offensif

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

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

Diversification Opportunities for ALM ES and ALM Offensif

0.91

Correlation Coefficient

ALM ES  ALM Offensif

Almost no diversification

The 3 months correlation between ALM and ALM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ALM ES Actions and ALM Offensif in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Offensif and ALM ES 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 ES Actions are associated (or correlated) with ALM Offensif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Offensif has no effect on the direction of ALM ES i.e., ALM ES and ALM Offensif go up and down completely randomly.

Pair Corralation between ALM ES and ALM Offensif

Assuming the 90 days trading horizon ALM ES is expected to generate 1.9 times less return on investment than ALM Offensif. In addition to that, ALM ES is 1.54 times more volatile than ALM Offensif. It trades about 0.03 of its total potential returns per unit of risk. ALM Offensif is currently generating about 0.1 per unit of volatility. If you would invest  31,031  in ALM Offensif on October 8, 2024 and sell it today you would earn a total of  798.00  from holding ALM Offensif or generate 2.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

ALM ES Actions  vs.  ALM Offensif

ALM ES Actions

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ALM ES Actions has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, ALM ES is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ALM Offensif

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ALM Offensif has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with ALM ES and ALM Offensif

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

The idea behind ALM ES Actions and ALM Offensif 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.