Correlation Between Aages SA and Alumil Rom

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

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

Diversification Opportunities for Aages SA and Alumil Rom

0.64

Correlation Coefficient

Aages SA  Alumil Rom

Poor diversification

The 3 months correlation between Aages and Alumil is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aages SA and Alumil Rom Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Rom Industry and Aages SA 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 Aages SA are associated (or correlated) with Alumil Rom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Rom Industry has no effect on the direction of Aages SA i.e., Aages SA and Alumil Rom go up and down completely randomly.

Pair Corralation between Aages SA and Alumil Rom

Assuming the 90 days trading horizon Aages SA is expected to under-perform the Alumil Rom. But the stock apears to be less risky and, when comparing its historical volatility, Aages SA is 1.3 times less risky than Alumil Rom. The stock trades about -0.07 of its potential returns per unit of risk. The Alumil Rom Industry is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  272.00  in Alumil Rom Industry on October 21, 2024 and sell it today you would lose (3.00) from holding Alumil Rom Industry or give up 1.1% of portfolio value over 90 days.

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

Aages SA  vs.  Alumil Rom Industry

Aages SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aages SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Alumil Rom Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumil Rom Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alumil Rom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aages SA and Alumil Rom

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

The idea behind Aages SA and Alumil Rom Industry 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.