Correlation Between Alexander Forbes and Advtech

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

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

Diversification Opportunities for Alexander Forbes and Advtech

0.47

Correlation Coefficient

Alexander Forbes  Advtech

Very weak diversification

The 3 months correlation between Alexander and Advtech is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alexander Forbes Grp and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech and Alexander Forbes 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 Alexander Forbes Grp are associated (or correlated) with Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Alexander Forbes i.e., Alexander Forbes and Advtech go up and down completely randomly.

Pair Corralation between Alexander Forbes and Advtech

Assuming the 90 days trading horizon Alexander Forbes Grp is expected to generate 2.55 times more return on investment than Advtech. However, Alexander Forbes is 2.55 times more volatile than Advtech. It trades about 0.27 of its potential returns per unit of risk. Advtech is currently generating about -0.05 per unit of risk. If you would invest  71,500  in Alexander Forbes Grp on October 10, 2024 and sell it today you would earn a total of  12,500  from holding Alexander Forbes Grp or generate 17.48% return on investment over 90 days.

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

Alexander Forbes Grp  vs.  Advtech

Alexander Forbes Grp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alexander Forbes Grp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Alexander Forbes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Advtech

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advtech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Advtech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alexander Forbes and Advtech

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

The idea behind Alexander Forbes Grp and Advtech 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.