Correlation Between Alfa Financial and 3I Group

Can any of the company-specific risk be diversified away by investing in both Alfa Financial and 3I Group 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 3I Group 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 3I Group PLC, you can compare the effects of market volatilities on Alfa Financial and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and 3I Group.

Diversification Opportunities for Alfa Financial and 3I Group

0.46

Correlation Coefficient

Alfa Financial  3I Group

Very weak diversification

The 3 months correlation between Alfa and III is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group PLC 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of Alfa Financial i.e., Alfa Financial and 3I Group go up and down completely randomly.

Pair Corralation between Alfa Financial and 3I Group

Assuming the 90 days trading horizon Alfa Financial Software is expected to under-perform the 3I Group. In addition to that, Alfa Financial is 1.55 times more volatile than 3I Group PLC. It trades about -0.09 of its total potential returns per unit of risk. 3I Group PLC is currently generating about -0.12 per unit of volatility. If you would invest  368,600  in 3I Group PLC on October 8, 2024 and sell it today you would lose (8,200) from holding 3I Group PLC or give up 2.22% of portfolio value over 90 days.

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

Alfa Financial Software  vs.  3I Group PLC

Alfa Financial Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

3I Group PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC 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, 3I Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfa Financial and 3I Group

The main advantage of trading using opposite Alfa Financial and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.

The idea behind Alfa Financial Software and 3I Group PLC 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.