Correlation Between Alstom SA and Winfarm

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

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

Diversification Opportunities for Alstom SA and Winfarm

0.19

Correlation Coefficient

Alstom SA  Winfarm

Average diversification

The 3 months correlation between Alstom and Winfarm is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Alstom SA and Winfarm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winfarm 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 Winfarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winfarm has no effect on the direction of Alstom SA i.e., Alstom SA and Winfarm go up and down completely randomly.

Pair Corralation between Alstom SA and Winfarm

Assuming the 90 days trading horizon Alstom SA is expected to generate 17.14 times less return on investment than Winfarm. In addition to that, Alstom SA is 1.92 times more volatile than Winfarm. It trades about 0.0 of its total potential returns per unit of risk. Winfarm is currently generating about 0.01 per unit of volatility. If you would invest  399.00  in Winfarm on December 30, 2024 and sell it today you would earn a total of  2.00  from holding Winfarm or generate 0.5% return on investment over 90 days.

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

Alstom SA  vs.  Winfarm

Alstom SA

Risk-Adjusted Performance

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.

Winfarm

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Winfarm are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Winfarm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alstom SA and Winfarm

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

The idea behind Alstom SA and Winfarm 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 Transaction History module to view history of all your transactions and understand their impact on performance.