Correlation Between Alfa Laval and Vestas Wind

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

Diversification Opportunities for Alfa Laval and Vestas Wind

-0.53

Correlation Coefficient

Alfa Laval  Vestas Wind

Excellent diversification

The 3 months correlation between Alfa and Vestas is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Laval AB and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Alfa Laval i.e., Alfa Laval and Vestas Wind go up and down completely randomly.

Pair Corralation between Alfa Laval and Vestas Wind

If you would invest  4,548  in Alfa Laval AB on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Alfa Laval AB or generate 0.0% return on investment over 90 days.

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

Alfa Laval AB  vs.  Vestas Wind Systems

Alfa Laval AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 9 (%) 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.

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Alfa Laval and Vestas Wind

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

The idea behind Alfa Laval AB and Vestas Wind Systems 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.