Correlation Between Alrov Properties and Plaza Centers

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

By analyzing existing cross correlation between Alrov Properties Lodgings and Plaza Centers NV, you can compare the effects of market volatilities on Alrov Properties and Plaza Centers 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 Alrov Properties with a short position of Plaza Centers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alrov Properties and Plaza Centers.

Diversification Opportunities for Alrov Properties and Plaza Centers

-0.46

Correlation Coefficient

Alrov Properties  Plaza Centers

Very good diversification

The 3 months correlation between Alrov and Plaza is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alrov Properties Lodgings and Plaza Centers NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plaza Centers NV and Alrov Properties 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 Alrov Properties Lodgings are associated (or correlated) with Plaza Centers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plaza Centers NV has no effect on the direction of Alrov Properties i.e., Alrov Properties and Plaza Centers go up and down completely randomly.

Pair Corralation between Alrov Properties and Plaza Centers

Assuming the 90 days trading horizon Alrov Properties Lodgings is expected to generate 0.64 times more return on investment than Plaza Centers. However, Alrov Properties Lodgings is 1.57 times less risky than Plaza Centers. It trades about 0.05 of its potential returns per unit of risk. Plaza Centers NV is currently generating about -0.04 per unit of risk. If you would invest  1,867,000  in Alrov Properties Lodgings on December 23, 2024 and sell it today you would earn a total of  82,000  from holding Alrov Properties Lodgings or generate 4.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.08%
Values	Daily Returns

Alrov Properties Lodgings  vs.  Plaza Centers NV

Alrov Properties Lodgings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alrov Properties Lodgings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alrov Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Plaza Centers NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plaza Centers NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alrov Properties and Plaza Centers

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

The idea behind Alrov Properties Lodgings and Plaza Centers NV 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.