Correlation Between COMPUTER MODELLING and ALD SA

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

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

Diversification Opportunities for COMPUTER MODELLING and ALD SA

0.52

Correlation Coefficient

COMPUTER MODELLING  ALD SA

Very weak diversification

The 3 months correlation between COMPUTER and ALD is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding COMPUTER MODELLING and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA and COMPUTER MODELLING 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 COMPUTER MODELLING are associated (or correlated) with ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of COMPUTER MODELLING i.e., COMPUTER MODELLING and ALD SA go up and down completely randomly.

Pair Corralation between COMPUTER MODELLING and ALD SA

Assuming the 90 days trading horizon COMPUTER MODELLING is expected to generate 38.38 times less return on investment than ALD SA. But when comparing it to its historical volatility, COMPUTER MODELLING is 11.01 times less risky than ALD SA. It trades about 0.07 of its potential returns per unit of risk. ALD SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  621.00  in ALD SA on December 21, 2024 and sell it today you would earn a total of  213.00  from holding ALD SA or generate 34.3% return on investment over 90 days.

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

COMPUTER MODELLING  vs.  ALD SA

COMPUTER MODELLING

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTER MODELLING are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, COMPUTER MODELLING is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ALD SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ALD SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALD SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COMPUTER MODELLING and ALD SA

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

The idea behind COMPUTER MODELLING and ALD SA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.