Correlation Between ALM Equity and Cibus Nordic

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

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

Diversification Opportunities for ALM Equity and Cibus Nordic

0.34

Correlation Coefficient

ALM Equity  Cibus Nordic

Weak diversification

The 3 months correlation between ALM and Cibus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Cibus Nordic Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cibus Nordic Real and ALM Equity 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 ALM Equity AB are associated (or correlated) with Cibus Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cibus Nordic Real has no effect on the direction of ALM Equity i.e., ALM Equity and Cibus Nordic go up and down completely randomly.

Pair Corralation between ALM Equity and Cibus Nordic

Assuming the 90 days trading horizon ALM Equity is expected to generate 35.92 times less return on investment than Cibus Nordic. But when comparing it to its historical volatility, ALM Equity AB is 2.13 times less risky than Cibus Nordic. It trades about 0.0 of its potential returns per unit of risk. Cibus Nordic Real is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16,438  in Cibus Nordic Real on September 4, 2024 and sell it today you would earn a total of  887.00  from holding Cibus Nordic Real or generate 5.4% return on investment over 90 days.

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

ALM Equity AB  vs.  Cibus Nordic Real

ALM Equity AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALM Equity AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cibus Nordic Real

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cibus Nordic Real are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cibus Nordic is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ALM Equity and Cibus Nordic

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

The idea behind ALM Equity AB and Cibus Nordic Real 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.