Correlation Between Alfa Laval and Amaero International

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

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

Diversification Opportunities for Alfa Laval and Amaero International

0.03

Correlation Coefficient

Alfa Laval  Amaero International

Significant diversification

The 3 months correlation between Alfa and Amaero is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and Amaero International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaero International and Alfa Laval 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 Laval AB are associated (or correlated) with Amaero International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaero International has no effect on the direction of Alfa Laval i.e., Alfa Laval and Amaero International go up and down completely randomly.

Pair Corralation between Alfa Laval and Amaero International

Assuming the 90 days horizon Alfa Laval is expected to generate 21.13 times less return on investment than Amaero International. But when comparing it to its historical volatility, Alfa Laval AB is 40.98 times less risky than Amaero International. It trades about 0.17 of its potential returns per unit of risk. Amaero International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Amaero International on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Amaero International or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Alfa Laval AB  vs.  Amaero International

Alfa Laval AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alfa Laval is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Amaero International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Amaero International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Amaero International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfa Laval and Amaero International

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

The idea behind Alfa Laval AB and Amaero International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.