Correlation Between ALi Corp and De Licacy

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

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

Diversification Opportunities for ALi Corp and De Licacy

0.69

Correlation Coefficient

ALi Corp  De Licacy

Poor diversification

The 3 months correlation between ALi and 1464 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ALi Corp and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial and ALi Corp 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 ALi Corp are associated (or correlated) with De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of ALi Corp i.e., ALi Corp and De Licacy go up and down completely randomly.

Pair Corralation between ALi Corp and De Licacy

Assuming the 90 days trading horizon ALi Corp is expected to generate 3.51 times more return on investment than De Licacy. However, ALi Corp is 3.51 times more volatile than De Licacy Industrial. It trades about 0.12 of its potential returns per unit of risk. De Licacy Industrial is currently generating about 0.1 per unit of risk. If you would invest  2,245  in ALi Corp on October 7, 2024 and sell it today you would earn a total of  1,455  from holding ALi Corp or generate 64.81% return on investment over 90 days.

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

ALi Corp  vs.  De Licacy Industrial

ALi Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALi Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALi Corp showed solid returns over the last few months and may actually be approaching a breakup point.

De Licacy Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALi Corp and De Licacy

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

The idea behind ALi Corp and De Licacy Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.