Correlation Between Alfen NV and China Carbon

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

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

Diversification Opportunities for Alfen NV and China Carbon

0.0

Correlation Coefficient

Alfen NV  China Carbon

Pay attention - limited upside

The 3 months correlation between Alfen and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alfen NV and China Carbon Graphit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Carbon Graphit and Alfen NV 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 Alfen NV are associated (or correlated) with China Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Carbon Graphit has no effect on the direction of Alfen NV i.e., Alfen NV and China Carbon go up and down completely randomly.

Pair Corralation between Alfen NV and China Carbon

If you would invest  0.01  in China Carbon Graphit on September 2, 2024 and sell it today you would earn a total of  0.00  from holding China Carbon Graphit or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alfen NV  vs.  China Carbon Graphit

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

China Carbon Graphit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Carbon Graphit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, China Carbon is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alfen NV and China Carbon

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

The idea behind Alfen NV and China Carbon Graphit 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.