Correlation Between Arcure SA and Alstom SA

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

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

Diversification Opportunities for Arcure SA and Alstom SA

-0.58

Correlation Coefficient

Arcure SA  Alstom SA

Excellent diversification

The 3 months correlation between Arcure and Alstom is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arcure SA and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA and Arcure 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 Arcure SA are associated (or correlated) with Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Arcure SA i.e., Arcure SA and Alstom SA go up and down completely randomly.

Pair Corralation between Arcure SA and Alstom SA

Assuming the 90 days trading horizon Arcure SA is expected to under-perform the Alstom SA. In addition to that, Arcure SA is 1.63 times more volatile than Alstom SA. It trades about 0.0 of its total potential returns per unit of risk. Alstom SA is currently generating about 0.1 per unit of volatility. If you would invest  1,856  in Alstom SA on August 31, 2024 and sell it today you would earn a total of  273.00  from holding Alstom SA or generate 14.71% return on investment over 90 days.

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

Arcure SA  vs.  Alstom SA

Arcure SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alstom SA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alstom SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alstom SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arcure SA and Alstom SA

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

The idea behind Arcure SA and Alstom 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 Commodity Directory module to find actively traded commodities issued by global exchanges.