Correlation Between ALFORMER Industrial and Powertech Industrial

Can any of the company-specific risk be diversified away by investing in both ALFORMER Industrial and Powertech 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 ALFORMER Industrial and Powertech Industrial 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 Powertech Industrial Co, you can compare the effects of market volatilities on ALFORMER Industrial and Powertech 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 ALFORMER Industrial with a short position of Powertech Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALFORMER Industrial and Powertech Industrial.

Diversification Opportunities for ALFORMER Industrial and Powertech Industrial

-0.23

Correlation Coefficient

ALFORMER Industrial  Powertech Industrial

Very good diversification

The 3 months correlation between ALFORMER and Powertech is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ALFORMER Industrial Co and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of ALFORMER Industrial i.e., ALFORMER Industrial and Powertech Industrial go up and down completely randomly.

Pair Corralation between ALFORMER Industrial and Powertech Industrial

Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to generate 1.52 times more return on investment than Powertech Industrial. However, ALFORMER Industrial is 1.52 times more volatile than Powertech Industrial Co. It trades about -0.16 of its potential returns per unit of risk. Powertech Industrial Co is currently generating about -0.36 per unit of risk. If you would invest  3,355  in ALFORMER Industrial Co on October 26, 2024 and sell it today you would lose (355.00) from holding ALFORMER Industrial Co or give up 10.58% of portfolio value over 90 days.

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

ALFORMER Industrial Co  vs.  Powertech Industrial Co

ALFORMER Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALFORMER Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Powertech Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ALFORMER Industrial and Powertech Industrial

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

The idea behind ALFORMER Industrial Co and Powertech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.