Correlation Between Amoeba SA and Alstom SA

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

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

Diversification Opportunities for Amoeba SA and Alstom SA

0.82

Correlation Coefficient

Amoeba SA  Alstom SA

Very poor diversification

The 3 months correlation between Amoeba and Alstom is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Amoeba SA and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA and Amoeba SA 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 Amoeba SA are associated (or correlated) with Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Amoeba SA i.e., Amoeba SA and Alstom SA go up and down completely randomly.

Pair Corralation between Amoeba SA and Alstom SA

Assuming the 90 days trading horizon Amoeba SA is expected to generate 1.89 times more return on investment than Alstom SA. However, Amoeba SA is 1.89 times more volatile than Alstom SA. It trades about 0.07 of its potential returns per unit of risk. Alstom SA is currently generating about 0.09 per unit of risk. If you would invest  41.00  in Amoeba SA on October 11, 2024 and sell it today you would earn a total of  42.00  from holding Amoeba SA or generate 102.44% return on investment over 90 days.

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

Amoeba SA  vs.  Alstom SA

Amoeba SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amoeba SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Amoeba SA reported solid returns over the last few months and may actually be approaching a breakup point.

Alstom SA

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alstom SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alstom SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amoeba SA and Alstom SA

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

The idea behind Amoeba SA and Alstom SA 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.