Correlation Between Alfas Solar and Ford Otomotiv

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

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

Diversification Opportunities for Alfas Solar and Ford Otomotiv

0.21

Correlation Coefficient

Alfas Solar  Ford Otomotiv

Modest diversification

The 3 months correlation between Alfas and Ford is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Alfas Solar Enerji and Ford Otomotiv Sanayi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Otomotiv Sanayi and Alfas Solar 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 Alfas Solar Enerji are associated (or correlated) with Ford Otomotiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Otomotiv Sanayi has no effect on the direction of Alfas Solar i.e., Alfas Solar and Ford Otomotiv go up and down completely randomly.

Pair Corralation between Alfas Solar and Ford Otomotiv

Assuming the 90 days trading horizon Alfas Solar Enerji is expected to generate 1.35 times more return on investment than Ford Otomotiv. However, Alfas Solar is 1.35 times more volatile than Ford Otomotiv Sanayi. It trades about -0.02 of its potential returns per unit of risk. Ford Otomotiv Sanayi is currently generating about -0.05 per unit of risk. If you would invest  7,018  in Alfas Solar Enerji on September 23, 2024 and sell it today you would lose (723.00) from holding Alfas Solar Enerji or give up 10.3% of portfolio value over 90 days.

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

Alfas Solar Enerji  vs.  Ford Otomotiv Sanayi

Alfas Solar Enerji

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfas Solar Enerji are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Alfas Solar demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ford Otomotiv Sanayi

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Otomotiv Sanayi are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, Ford Otomotiv may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alfas Solar and Ford Otomotiv

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

The idea behind Alfas Solar Enerji and Ford Otomotiv Sanayi 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.