Correlation Between Alfa Financial and CN MODERN

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

By analyzing existing cross correlation between Alfa Financial Software and CN MODERN DAIRY, you can compare the effects of market volatilities on Alfa Financial and CN MODERN 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 Alfa Financial with a short position of CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and CN MODERN.

Diversification Opportunities for Alfa Financial and CN MODERN

0.74

Correlation Coefficient

Alfa Financial  CN MODERN

Poor diversification

The 3 months correlation between Alfa and 07M is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of Alfa Financial i.e., Alfa Financial and CN MODERN go up and down completely randomly.

Pair Corralation between Alfa Financial and CN MODERN

Assuming the 90 days trading horizon Alfa Financial is expected to generate 7.41 times less return on investment than CN MODERN. But when comparing it to its historical volatility, Alfa Financial Software is 2.92 times less risky than CN MODERN. It trades about 0.03 of its potential returns per unit of risk. CN MODERN DAIRY is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11.00  in CN MODERN DAIRY on December 20, 2024 and sell it today you would earn a total of  2.00  from holding CN MODERN DAIRY or generate 18.18% return on investment over 90 days.

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

Alfa Financial Software  vs.  CN MODERN DAIRY

Alfa Financial Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CN MODERN DAIRY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfa Financial and CN MODERN

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

The idea behind Alfa Financial Software and CN MODERN DAIRY 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.