Correlation Between Alkame Holdings and Imperial Brands

Can any of the company-specific risk be diversified away by investing in both Alkame Holdings and Imperial Brands 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 Alkame Holdings and Imperial Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alkame Holdings and Imperial Brands PLC, you can compare the effects of market volatilities on Alkame Holdings and Imperial Brands 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 Alkame Holdings with a short position of Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkame Holdings and Imperial Brands.

Diversification Opportunities for Alkame Holdings and Imperial Brands

0.0

Correlation Coefficient

Alkame Holdings  Imperial Brands

Pay attention - limited upside

The 3 months correlation between Alkame and Imperial is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alkame Holdings and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC and Alkame Holdings 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 Alkame Holdings are associated (or correlated) with Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Alkame Holdings i.e., Alkame Holdings and Imperial Brands go up and down completely randomly.

Pair Corralation between Alkame Holdings and Imperial Brands

Given the investment horizon of 90 days Alkame Holdings is expected to generate 14.41 times more return on investment than Imperial Brands. However, Alkame Holdings is 14.41 times more volatile than Imperial Brands PLC. It trades about 0.06 of its potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.07 per unit of risk. If you would invest  0.03  in Alkame Holdings on September 13, 2024 and sell it today you would lose (0.03) from holding Alkame Holdings or give up 100.0% of portfolio value over 90 days.

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

Alkame Holdings  vs.  Imperial Brands PLC

Alkame Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alkame Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Imperial Brands PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, Imperial Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkame Holdings and Imperial Brands

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

The idea behind Alkame Holdings and Imperial Brands 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.

Check out your portfolio center.

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.