Correlation Between Victory New and ALFORMER Industrial

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

By analyzing existing cross correlation between Victory New Materials and ALFORMER Industrial Co, you can compare the effects of market volatilities on Victory New and ALFORMER Industrial 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 Victory New with a short position of ALFORMER Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory New and ALFORMER Industrial.

Diversification Opportunities for Victory New and ALFORMER Industrial

-0.42

Correlation Coefficient

Victory New  ALFORMER Industrial

Very good diversification

The 3 months correlation between Victory and ALFORMER is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Victory New Materials and ALFORMER Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALFORMER Industrial and Victory New 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 Victory New Materials are associated (or correlated) with ALFORMER Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALFORMER Industrial has no effect on the direction of Victory New i.e., Victory New and ALFORMER Industrial go up and down completely randomly.

Pair Corralation between Victory New and ALFORMER Industrial

Assuming the 90 days trading horizon Victory New Materials is expected to under-perform the ALFORMER Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Victory New Materials is 2.83 times less risky than ALFORMER Industrial. The stock trades about -0.05 of its potential returns per unit of risk. The ALFORMER Industrial Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,775  in ALFORMER Industrial Co on September 22, 2024 and sell it today you would earn a total of  700.00  from holding ALFORMER Industrial Co or generate 25.23% return on investment over 90 days.

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

Victory New Materials  vs.  ALFORMER Industrial Co

Victory New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Victory New is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ALFORMER Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALFORMER Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Victory New and ALFORMER Industrial

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

The idea behind Victory New Materials and ALFORMER Industrial Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.