Correlation Between VERTIV HOLCL and Alfen NV

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

By analyzing existing cross correlation between VERTIV HOLCL A and Alfen NV, you can compare the effects of market volatilities on VERTIV HOLCL and Alfen NV 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 VERTIV HOLCL with a short position of Alfen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of VERTIV HOLCL and Alfen NV.

Diversification Opportunities for VERTIV HOLCL and Alfen NV

-0.04

Correlation Coefficient

VERTIV HOLCL  Alfen NV

Good diversification

The 3 months correlation between VERTIV and Alfen is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding VERTIV HOLCL A and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV and VERTIV HOLCL 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 VERTIV HOLCL A are associated (or correlated) with Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of VERTIV HOLCL i.e., VERTIV HOLCL and Alfen NV go up and down completely randomly.

Pair Corralation between VERTIV HOLCL and Alfen NV

Assuming the 90 days horizon VERTIV HOLCL A is expected to under-perform the Alfen NV. In addition to that, VERTIV HOLCL is 1.5 times more volatile than Alfen NV. It trades about -0.1 of its total potential returns per unit of risk. Alfen NV is currently generating about 0.07 per unit of volatility. If you would invest  1,181  in Alfen NV on December 29, 2024 and sell it today you would earn a total of  172.00  from holding Alfen NV or generate 14.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

VERTIV HOLCL A  vs.  Alfen NV

VERTIV HOLCL A

Risk-Adjusted Performance

Very Weak

Over the last 90 days VERTIV HOLCL A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alfen NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfen NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alfen NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VERTIV HOLCL and Alfen NV

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

The idea behind VERTIV HOLCL A and Alfen NV 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.