Correlation Between Alfa Financial and Roper Technologies

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

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

Diversification Opportunities for Alfa Financial and Roper Technologies

0.11

Correlation Coefficient

Alfa Financial  Roper Technologies

Average diversification

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

Pair Corralation between Alfa Financial and Roper Technologies

Assuming the 90 days trading horizon Alfa Financial is expected to generate 2.76 times less return on investment than Roper Technologies. But when comparing it to its historical volatility, Alfa Financial Software is 4.97 times less risky than Roper Technologies. It trades about 0.07 of its potential returns per unit of risk. Roper Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  56,232  in Roper Technologies on September 30, 2024 and sell it today you would lose (3,763) from holding Roper Technologies or give up 6.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.45%
Values	Daily Returns

Alfa Financial Software  vs.  Roper Technologies

Alfa Financial Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Roper Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Alfa Financial and Roper Technologies

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

The idea behind Alfa Financial Software and Roper Technologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.