Correlation Between Alarm Holdings and AMSWA Old

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

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

Diversification Opportunities for Alarm Holdings and AMSWA Old

0.76

Correlation Coefficient

Alarm Holdings  AMSWA Old

Poor diversification

The 3 months correlation between Alarm and AMSWA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Alarm Holdings and AMSWA Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMSWA Old and Alarm Holdings 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 Alarm Holdings are associated (or correlated) with AMSWA Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMSWA Old has no effect on the direction of Alarm Holdings i.e., Alarm Holdings and AMSWA Old go up and down completely randomly.

Pair Corralation between Alarm Holdings and AMSWA Old

If you would invest  1,077  in AMSWA Old on October 9, 2024 and sell it today you would earn a total of  0.00  from holding AMSWA Old or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.26%
Values	Daily Returns

Alarm Holdings  vs.  AMSWA Old

Alarm Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alarm Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alarm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

AMSWA Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMSWA Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMSWA Old is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alarm Holdings and AMSWA Old

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

The idea behind Alarm Holdings and AMSWA Old 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.