Correlation Between ALM Equity and Absolent Group

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

Diversification Opportunities for ALM Equity and Absolent Group

0.3

Correlation Coefficient

ALM Equity  Absolent Group

Weak diversification

The 3 months correlation between ALM and Absolent is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Absolent Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolent Group 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 Absolent Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolent Group AB has no effect on the direction of ALM Equity i.e., ALM Equity and Absolent Group go up and down completely randomly.

Pair Corralation between ALM Equity and Absolent Group

Assuming the 90 days trading horizon ALM Equity AB is expected to under-perform the Absolent Group. In addition to that, ALM Equity is 1.07 times more volatile than Absolent Group AB. It trades about -0.2 of its total potential returns per unit of risk. Absolent Group AB is currently generating about 0.03 per unit of volatility. If you would invest  25,900  in Absolent Group AB on December 30, 2024 and sell it today you would earn a total of  700.00  from holding Absolent Group AB or generate 2.7% 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.  Absolent Group 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 unsteady performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Absolent Group AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Absolent Group AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Absolent Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ALM Equity and Absolent Group

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

The idea behind ALM Equity AB and Absolent Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.