Correlation Between ALFORMER Industrial and Simplo Technology

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

Diversification Opportunities for ALFORMER Industrial and Simplo Technology

0.13

Correlation Coefficient

ALFORMER Industrial  Simplo Technology

Average diversification

The 3 months correlation between ALFORMER and Simplo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ALFORMER Industrial Co and Simplo Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplo Technology 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 Simplo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplo Technology has no effect on the direction of ALFORMER Industrial i.e., ALFORMER Industrial and Simplo Technology go up and down completely randomly.

Pair Corralation between ALFORMER Industrial and Simplo Technology

Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to generate 1.88 times more return on investment than Simplo Technology. However, ALFORMER Industrial is 1.88 times more volatile than Simplo Technology Co. It trades about 0.1 of its potential returns per unit of risk. Simplo Technology Co is currently generating about 0.05 per unit of risk. If you would invest  2,775  in ALFORMER Industrial Co on September 22, 2024 and sell it today you would earn a total of  700.00  from holding ALFORMER Industrial Co or generate 25.23% 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.  Simplo Technology Co

ALFORMER Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 8 (%) 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.

Simplo Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simplo Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Simplo Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ALFORMER Industrial and Simplo Technology

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

The idea behind ALFORMER Industrial Co and Simplo Technology 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.