Correlation Between Alexander Forbes and Trematon Capital

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

Diversification Opportunities for Alexander Forbes and Trematon Capital

-0.11

Correlation Coefficient

Alexander Forbes  Trematon Capital

Good diversification

The 3 months correlation between Alexander and Trematon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Alexander Forbes Grp and Trematon Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trematon Capital Inv 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 Trematon Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trematon Capital Inv has no effect on the direction of Alexander Forbes i.e., Alexander Forbes and Trematon Capital go up and down completely randomly.

Pair Corralation between Alexander Forbes and Trematon Capital

Assuming the 90 days trading horizon Alexander Forbes Grp is expected to generate 0.52 times more return on investment than Trematon Capital. However, Alexander Forbes Grp is 1.92 times less risky than Trematon Capital. It trades about 0.2 of its potential returns per unit of risk. Trematon Capital Investments is currently generating about 0.0 per unit of risk. If you would invest  74,000  in Alexander Forbes Grp on September 24, 2024 and sell it today you would earn a total of  9,000  from holding Alexander Forbes Grp or generate 12.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Alexander Forbes Grp  vs.  Trematon Capital Investments

Alexander Forbes Grp

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alexander Forbes Grp are ranked lower than 11 (%) 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.

Trematon Capital Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trematon Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Trematon Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alexander Forbes and Trematon Capital

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

The idea behind Alexander Forbes Grp and Trematon Capital Investments 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.