Correlation Between Alstom SA and Alan Allman

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

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

Diversification Opportunities for Alstom SA and Alan Allman

-0.45

Correlation Coefficient

Alstom SA  Alan Allman

Very good diversification

The 3 months correlation between Alstom and Alan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Alstom SA and Alan Allman Associates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alan Allman Associates and Alstom 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 Alstom SA are associated (or correlated) with Alan Allman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alan Allman Associates has no effect on the direction of Alstom SA i.e., Alstom SA and Alan Allman go up and down completely randomly.

Pair Corralation between Alstom SA and Alan Allman

Assuming the 90 days trading horizon Alstom SA is expected to under-perform the Alan Allman. But the stock apears to be less risky and, when comparing its historical volatility, Alstom SA is 4.53 times less risky than Alan Allman. The stock trades about -0.17 of its potential returns per unit of risk. The Alan Allman Associates is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Alan Allman Associates on October 25, 2024 and sell it today you would earn a total of  175.00  from holding Alan Allman Associates or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Alstom SA  vs.  Alan Allman Associates

Alstom SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alstom SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Alan Allman Associates

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alan Allman Associates are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alan Allman sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alstom SA and Alan Allman

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

The idea behind Alstom SA and Alan Allman Associates 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.