Correlation Between Alfen NV and Powercell Sweden

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

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

Diversification Opportunities for Alfen NV and Powercell Sweden

-0.48

Correlation Coefficient

Alfen NV  Powercell Sweden

Very good diversification

The 3 months correlation between Alfen and Powercell is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alfen NV and Powercell Sweden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powercell Sweden and Alfen NV 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 Alfen NV are associated (or correlated) with Powercell Sweden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powercell Sweden has no effect on the direction of Alfen NV i.e., Alfen NV and Powercell Sweden go up and down completely randomly.

Pair Corralation between Alfen NV and Powercell Sweden

Assuming the 90 days horizon Alfen NV is expected to generate 0.93 times more return on investment than Powercell Sweden. However, Alfen NV is 1.08 times less risky than Powercell Sweden. It trades about 0.07 of its potential returns per unit of risk. Powercell Sweden is currently generating about -0.06 per unit of risk. If you would invest  1,181  in Alfen NV on December 30, 2024 and sell it today you would earn a total of  148.00  from holding Alfen NV or generate 12.53% return on investment over 90 days.

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

Alfen NV  vs.  Powercell Sweden

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.

Powercell Sweden

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powercell Sweden 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.

Pair Trading with Alfen NV and Powercell Sweden

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

The idea behind Alfen NV and Powercell Sweden 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.