Correlation Between ALM Equity and Sdiptech

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

Diversification Opportunities for ALM Equity and Sdiptech

0.59

Correlation Coefficient

ALM Equity  Sdiptech

Very weak diversification

The 3 months correlation between ALM and Sdiptech is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Sdiptech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sdiptech AB 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 Sdiptech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sdiptech AB has no effect on the direction of ALM Equity i.e., ALM Equity and Sdiptech go up and down completely randomly.

Pair Corralation between ALM Equity and Sdiptech

Assuming the 90 days trading horizon ALM Equity AB is expected to generate 0.38 times more return on investment than Sdiptech. However, ALM Equity AB is 2.63 times less risky than Sdiptech. It trades about -0.04 of its potential returns per unit of risk. Sdiptech AB is currently generating about -0.25 per unit of risk. If you would invest  9,021  in ALM Equity AB on September 3, 2024 and sell it today you would lose (201.00) from holding ALM Equity AB or give up 2.23% of portfolio value over 90 days.

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

ALM Equity AB  vs.  Sdiptech AB

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.

Sdiptech AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sdiptech AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat 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 ALM Equity and Sdiptech

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

The idea behind ALM Equity AB and Sdiptech 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.