Correlation Between ALFORMER Industrial and Xintec

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

Diversification Opportunities for ALFORMER Industrial and Xintec

-0.29

Correlation Coefficient

ALFORMER Industrial  Xintec

Very good diversification

The 3 months correlation between ALFORMER and Xintec is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding ALFORMER Industrial Co and Xintec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xintec 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 Xintec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xintec has no effect on the direction of ALFORMER Industrial i.e., ALFORMER Industrial and Xintec go up and down completely randomly.

Pair Corralation between ALFORMER Industrial and Xintec

Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to under-perform the Xintec. In addition to that, ALFORMER Industrial is 1.37 times more volatile than Xintec. It trades about -0.52 of its total potential returns per unit of risk. Xintec is currently generating about -0.16 per unit of volatility. If you would invest  20,500  in Xintec on October 6, 2024 and sell it today you would lose (1,150) from holding Xintec or give up 5.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

ALFORMER Industrial Co  vs.  Xintec

ALFORMER Industrial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 5 (%) 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.

Xintec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xintec 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.

Pair Trading with ALFORMER Industrial and Xintec

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

The idea behind ALFORMER Industrial Co and Xintec 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.