Correlation Between Sunspring Metal and ALFORMER Industrial

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

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

Diversification Opportunities for Sunspring Metal and ALFORMER Industrial

-0.77

Correlation Coefficient

Sunspring Metal  ALFORMER Industrial

Pay attention - limited upside

The 3 months correlation between Sunspring and ALFORMER is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sunspring Metal Corp and ALFORMER Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALFORMER Industrial and Sunspring Metal 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 Sunspring Metal Corp 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 Sunspring Metal i.e., Sunspring Metal and ALFORMER Industrial go up and down completely randomly.

Pair Corralation between Sunspring Metal and ALFORMER Industrial

Assuming the 90 days trading horizon Sunspring Metal Corp is expected to under-perform the ALFORMER Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Sunspring Metal Corp is 1.33 times less risky than ALFORMER Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The ALFORMER Industrial Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,735  in ALFORMER Industrial Co on September 20, 2024 and sell it today you would earn a total of  860.00  from holding ALFORMER Industrial Co or generate 31.44% return on investment over 90 days.

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

Sunspring Metal Corp  vs.  ALFORMER Industrial Co

Sunspring Metal Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunspring Metal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ALFORMER Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 9 (%) 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 Sunspring Metal and ALFORMER Industrial

The main advantage of trading using opposite Sunspring Metal and ALFORMER Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunspring Metal 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 Sunspring Metal Corp 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.