Correlation Between Alfa Financial and Polar Capital

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

Diversification Opportunities for Alfa Financial and Polar Capital

0.09

Correlation Coefficient

Alfa Financial  Polar Capital

Significant diversification

The 3 months correlation between Alfa and Polar is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Alfa Financial i.e., Alfa Financial and Polar Capital go up and down completely randomly.

Pair Corralation between Alfa Financial and Polar Capital

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 0.94 times more return on investment than Polar Capital. However, Alfa Financial Software is 1.07 times less risky than Polar Capital. It trades about 0.1 of its potential returns per unit of risk. Polar Capital Technology is currently generating about 0.04 per unit of risk. If you would invest  22,050  in Alfa Financial Software on November 29, 2024 and sell it today you would earn a total of  2,050  from holding Alfa Financial Software or generate 9.3% return on investment over 90 days.

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

Alfa Financial Software  vs.  Polar Capital Technology

Alfa Financial Software

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 8 (%) 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 March 2025.

Polar Capital Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Polar Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alfa Financial and Polar Capital

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

The idea behind Alfa Financial Software and Polar Capital Technology 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.