Correlation Between ALFORMER Industrial and Axiomtek

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

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

Diversification Opportunities for ALFORMER Industrial and Axiomtek

0.09

Correlation Coefficient

ALFORMER Industrial  Axiomtek

Significant diversification

The 3 months correlation between ALFORMER and Axiomtek is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ALFORMER Industrial Co and Axiomtek Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axiomtek and ALFORMER Industrial 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 ALFORMER Industrial Co are associated (or correlated) with Axiomtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axiomtek has no effect on the direction of ALFORMER Industrial i.e., ALFORMER Industrial and Axiomtek go up and down completely randomly.

Pair Corralation between ALFORMER Industrial and Axiomtek

Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to under-perform the Axiomtek. But the stock apears to be less risky and, when comparing its historical volatility, ALFORMER Industrial Co is 1.25 times less risky than Axiomtek. The stock trades about -0.16 of its potential returns per unit of risk. The Axiomtek Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  10,750  in Axiomtek Co on October 11, 2024 and sell it today you would earn a total of  2,100  from holding Axiomtek Co or generate 19.53% return on investment over 90 days.

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

ALFORMER Industrial Co  vs.  Axiomtek Co

ALFORMER Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 7 (%) 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.

Axiomtek

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axiomtek Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Axiomtek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALFORMER Industrial and Axiomtek

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

The idea behind ALFORMER Industrial Co and Axiomtek 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.