Correlation Between Alligo AB and AddLife AB

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

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

Diversification Opportunities for Alligo AB and AddLife AB

0.92

Correlation Coefficient

Alligo AB  AddLife AB

Almost no diversification

The 3 months correlation between Alligo and AddLife is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Alligo AB Series and AddLife AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AddLife AB and Alligo AB 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 Alligo AB Series are associated (or correlated) with AddLife AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AddLife AB has no effect on the direction of Alligo AB i.e., Alligo AB and AddLife AB go up and down completely randomly.

Pair Corralation between Alligo AB and AddLife AB

Assuming the 90 days trading horizon Alligo AB Series is expected to generate 1.17 times more return on investment than AddLife AB. However, Alligo AB is 1.17 times more volatile than AddLife AB. It trades about -0.06 of its potential returns per unit of risk. AddLife AB is currently generating about -0.09 per unit of risk. If you would invest  14,680  in Alligo AB Series on October 6, 2024 and sell it today you would lose (1,540) from holding Alligo AB Series or give up 10.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Alligo AB Series  vs.  AddLife AB

Alligo AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alligo AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

AddLife AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AddLife AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alligo AB and AddLife AB

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

The idea behind Alligo AB Series and AddLife AB 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.