Correlation Between 2S Metal and ALT Telecom

Can any of the company-specific risk be diversified away by investing in both 2S Metal and ALT Telecom 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 2S Metal and ALT Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2S Metal Public and ALT Telecom Public, you can compare the effects of market volatilities on 2S Metal and ALT Telecom 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 2S Metal with a short position of ALT Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2S Metal and ALT Telecom.

Diversification Opportunities for 2S Metal and ALT Telecom

0.75

Correlation Coefficient

2S Metal  ALT Telecom

Poor diversification

The 3 months correlation between 2S Metal and ALT is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding 2S Metal Public and ALT Telecom Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALT Telecom Public and 2S 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 2S Metal Public are associated (or correlated) with ALT Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALT Telecom Public has no effect on the direction of 2S Metal i.e., 2S Metal and ALT Telecom go up and down completely randomly.

Pair Corralation between 2S Metal and ALT Telecom

Assuming the 90 days horizon 2S Metal Public is expected to generate 1.02 times more return on investment than ALT Telecom. However, 2S Metal is 1.02 times more volatile than ALT Telecom Public. It trades about -0.12 of its potential returns per unit of risk. ALT Telecom Public is currently generating about -0.12 per unit of risk. If you would invest  296.00  in 2S Metal Public on October 25, 2024 and sell it today you would lose (30.00) from holding 2S Metal Public or give up 10.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

2S Metal Public  vs.  ALT Telecom Public

2S Metal Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 2S Metal Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

ALT Telecom Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALT Telecom Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with 2S Metal and ALT Telecom

The main advantage of trading using opposite 2S Metal and ALT Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2S Metal position performs unexpectedly, ALT Telecom 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 ALT Telecom will offset losses from the drop in ALT Telecom's long position.

The idea behind 2S Metal Public and ALT Telecom Public 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.