Correlation Between Alta SA and Stalprodukt

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

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

Diversification Opportunities for Alta SA and Stalprodukt

0.35

Correlation Coefficient

Alta SA  Stalprodukt

Weak diversification

The 3 months correlation between Alta and Stalprodukt is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alta SA and Stalprodukt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stalprodukt SA and Alta 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 Alta SA are associated (or correlated) with Stalprodukt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stalprodukt SA has no effect on the direction of Alta SA i.e., Alta SA and Stalprodukt go up and down completely randomly.

Pair Corralation between Alta SA and Stalprodukt

Assuming the 90 days trading horizon Alta SA is expected to generate 2.81 times more return on investment than Stalprodukt. However, Alta SA is 2.81 times more volatile than Stalprodukt SA. It trades about 0.02 of its potential returns per unit of risk. Stalprodukt SA is currently generating about -0.1 per unit of risk. If you would invest  243.00  in Alta SA on October 26, 2024 and sell it today you would earn a total of  2.00  from holding Alta SA or generate 0.82% return on investment over 90 days.

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

Alta SA  vs.  Stalprodukt SA

Alta SA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alta SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Alta SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Stalprodukt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stalprodukt SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Stalprodukt is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alta SA and Stalprodukt

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

The idea behind Alta SA and Stalprodukt SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.