Correlation Between Alector and Radware

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

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

Diversification Opportunities for Alector and Radware

-0.48

Correlation Coefficient

Alector  Radware

Very good diversification

The 3 months correlation between Alector and Radware is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alector and Radware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radware and Alector 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 Alector are associated (or correlated) with Radware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radware has no effect on the direction of Alector i.e., Alector and Radware go up and down completely randomly.

Pair Corralation between Alector and Radware

Given the investment horizon of 90 days Alector is expected to under-perform the Radware. In addition to that, Alector is 3.12 times more volatile than Radware. It trades about -0.19 of its total potential returns per unit of risk. Radware is currently generating about 0.04 per unit of volatility. If you would invest  2,228  in Radware on September 30, 2024 and sell it today you would earn a total of  94.00  from holding Radware or generate 4.22% return on investment over 90 days.

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

Alector  vs.  Radware

Alector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alector has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Radware

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Radware are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Radware is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alector and Radware

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

The idea behind Alector and Radware 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.