Correlation Between Alro Slatina and Teraplast Bist

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

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

Diversification Opportunities for Alro Slatina and Teraplast Bist

0.02

Correlation Coefficient

Alro Slatina  Teraplast Bist

Significant diversification

The 3 months correlation between Alro and Teraplast is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Alro Slatina and Teraplast Bist in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teraplast Bist and Alro Slatina 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 Alro Slatina are associated (or correlated) with Teraplast Bist. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teraplast Bist has no effect on the direction of Alro Slatina i.e., Alro Slatina and Teraplast Bist go up and down completely randomly.

Pair Corralation between Alro Slatina and Teraplast Bist

Assuming the 90 days trading horizon Alro Slatina is expected to generate 1.23 times more return on investment than Teraplast Bist. However, Alro Slatina is 1.23 times more volatile than Teraplast Bist. It trades about 0.02 of its potential returns per unit of risk. Teraplast Bist is currently generating about -0.11 per unit of risk. If you would invest  152.00  in Alro Slatina on December 22, 2024 and sell it today you would earn a total of  1.00  from holding Alro Slatina or generate 0.66% return on investment over 90 days.

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

Alro Slatina  vs.  Teraplast Bist

Alro Slatina

Risk-Adjusted Performance

Very Weak

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

Teraplast Bist

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teraplast Bist has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Alro Slatina and Teraplast Bist

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

The idea behind Alro Slatina and Teraplast Bist 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..