Correlation Between ALEFARM BREWING and GEAR4MUSIC

Can any of the company-specific risk be diversified away by investing in both ALEFARM BREWING and GEAR4MUSIC 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 ALEFARM BREWING and GEAR4MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALEFARM BREWING DK 05 and GEAR4MUSIC LS 10, you can compare the effects of market volatilities on ALEFARM BREWING and GEAR4MUSIC 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 ALEFARM BREWING with a short position of GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALEFARM BREWING and GEAR4MUSIC.

Diversification Opportunities for ALEFARM BREWING and GEAR4MUSIC

-0.77

Correlation Coefficient

ALEFARM BREWING  GEAR4MUSIC

Pay attention - limited upside

The 3 months correlation between ALEFARM and GEAR4MUSIC is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding ALEFARM BREWING DK 05 and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 and ALEFARM BREWING 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 ALEFARM BREWING DK 05 are associated (or correlated) with GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of ALEFARM BREWING i.e., ALEFARM BREWING and GEAR4MUSIC go up and down completely randomly.

Pair Corralation between ALEFARM BREWING and GEAR4MUSIC

Assuming the 90 days horizon ALEFARM BREWING DK 05 is expected to generate 1.43 times more return on investment than GEAR4MUSIC. However, ALEFARM BREWING is 1.43 times more volatile than GEAR4MUSIC LS 10. It trades about 0.17 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about -0.15 per unit of risk. If you would invest  16.00  in ALEFARM BREWING DK 05 on December 30, 2024 and sell it today you would earn a total of  7.00  from holding ALEFARM BREWING DK 05 or generate 43.75% return on investment over 90 days.

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

ALEFARM BREWING DK 05  vs.  GEAR4MUSIC LS 10

ALEFARM BREWING DK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALEFARM BREWING DK 05 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ALEFARM BREWING reported solid returns over the last few months and may actually be approaching a breakup point.

GEAR4MUSIC LS 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 ALEFARM BREWING and GEAR4MUSIC

The main advantage of trading using opposite ALEFARM BREWING and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALEFARM BREWING position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.

The idea behind ALEFARM BREWING DK 05 and GEAR4MUSIC LS 10 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.