Correlation Between Alarum Technologies and CiT

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

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

Diversification Opportunities for Alarum Technologies and CiT

0.14

Correlation Coefficient

Alarum Technologies  CiT

Average diversification

The 3 months correlation between Alarum and CiT is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alarum Technologies and CiT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CiT Inc and Alarum Technologies 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 Alarum Technologies are associated (or correlated) with CiT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CiT Inc has no effect on the direction of Alarum Technologies i.e., Alarum Technologies and CiT go up and down completely randomly.

Pair Corralation between Alarum Technologies and CiT

Given the investment horizon of 90 days Alarum Technologies is expected to generate 2.88 times more return on investment than CiT. However, Alarum Technologies is 2.88 times more volatile than CiT Inc. It trades about 0.05 of its potential returns per unit of risk. CiT Inc is currently generating about 0.0 per unit of risk. If you would invest  1,178  in Alarum Technologies on September 4, 2024 and sell it today you would earn a total of  94.00  from holding Alarum Technologies or generate 7.98% return on investment over 90 days.

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

Alarum Technologies  vs.  CiT Inc

Alarum Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Alarum Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

CiT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CiT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CiT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alarum Technologies and CiT

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

The idea behind Alarum Technologies and CiT Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.