Correlation Between ALM Equity and Volati AB

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

Diversification Opportunities for ALM Equity and Volati AB

-0.15

Correlation Coefficient

ALM Equity  Volati AB

Good diversification

The 3 months correlation between ALM and Volati is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Volati AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volati 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 Volati AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volati AB has no effect on the direction of ALM Equity i.e., ALM Equity and Volati AB go up and down completely randomly.

Pair Corralation between ALM Equity and Volati AB

Assuming the 90 days trading horizon ALM Equity AB is expected to under-perform the Volati AB. In addition to that, ALM Equity is 2.74 times more volatile than Volati AB. It trades about -0.01 of its total potential returns per unit of risk. Volati AB is currently generating about 0.18 per unit of volatility. If you would invest  61,416  in Volati AB on December 2, 2024 and sell it today you would earn a total of  1,984  from holding Volati AB or generate 3.23% return on investment over 90 days.

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

ALM Equity AB  vs.  Volati AB

ALM Equity AB

Risk-Adjusted Performance

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.

Volati AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volati AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Volati AB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ALM Equity and Volati AB

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

The idea behind ALM Equity AB and Volati 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.