Correlation Between Alumil Aluminium and Lanakam SA

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

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

Diversification Opportunities for Alumil Aluminium and Lanakam SA

0.01

Correlation Coefficient

Alumil Aluminium  Lanakam SA

Significant diversification

The 3 months correlation between Alumil and Lanakam is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alumil Aluminium Industry and Lanakam SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lanakam SA and Alumil Aluminium 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 Alumil Aluminium Industry are associated (or correlated) with Lanakam SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lanakam SA has no effect on the direction of Alumil Aluminium i.e., Alumil Aluminium and Lanakam SA go up and down completely randomly.

Pair Corralation between Alumil Aluminium and Lanakam SA

Assuming the 90 days trading horizon Alumil Aluminium Industry is expected to generate 0.74 times more return on investment than Lanakam SA. However, Alumil Aluminium Industry is 1.36 times less risky than Lanakam SA. It trades about 0.1 of its potential returns per unit of risk. Lanakam SA is currently generating about 0.02 per unit of risk. If you would invest  292.00  in Alumil Aluminium Industry on October 7, 2024 and sell it today you would earn a total of  157.00  from holding Alumil Aluminium Industry or generate 53.77% return on investment over 90 days.

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

Alumil Aluminium Industry  vs.  Lanakam SA

Alumil Aluminium Industry

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alumil Aluminium Industry are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alumil Aluminium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lanakam SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lanakam SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Lanakam SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alumil Aluminium and Lanakam SA

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

The idea behind Alumil Aluminium Industry and Lanakam 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.