Correlation Between Alfa Financial and Medtronic PLC

Can any of the company-specific risk be diversified away by investing in both Alfa Financial and Medtronic PLC 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 Medtronic PLC 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 Medtronic PLC, you can compare the effects of market volatilities on Alfa Financial and Medtronic PLC 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 Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and Medtronic PLC.

Diversification Opportunities for Alfa Financial and Medtronic PLC

-0.57

Correlation Coefficient

Alfa Financial  Medtronic PLC

Excellent diversification

The 3 months correlation between Alfa and Medtronic is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic PLC 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Alfa Financial i.e., Alfa Financial and Medtronic PLC go up and down completely randomly.

Pair Corralation between Alfa Financial and Medtronic PLC

Assuming the 90 days trading horizon Alfa Financial Software is expected to under-perform the Medtronic PLC. In addition to that, Alfa Financial is 1.55 times more volatile than Medtronic PLC. It trades about -0.05 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.02 per unit of volatility. If you would invest  8,369  in Medtronic PLC on October 24, 2024 and sell it today you would earn a total of  111.00  from holding Medtronic PLC or generate 1.33% return on investment over 90 days.

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

Alfa Financial Software  vs.  Medtronic PLC

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Medtronic PLC

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medtronic PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Medtronic PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alfa Financial and Medtronic PLC

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

The idea behind Alfa Financial Software and Medtronic PLC 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.