Correlation Between Alternus Energy and XXL ASA

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

By analyzing existing cross correlation between Alternus Energy Group and XXL ASA, you can compare the effects of market volatilities on Alternus Energy and XXL ASA 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 Alternus Energy with a short position of XXL ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternus Energy and XXL ASA.

Diversification Opportunities for Alternus Energy and XXL ASA

0.33

Correlation Coefficient

Alternus Energy  XXL ASA

Weak diversification

The 3 months correlation between Alternus and XXL is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alternus Energy Group and XXL ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XXL ASA and Alternus Energy 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 Alternus Energy Group are associated (or correlated) with XXL ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XXL ASA has no effect on the direction of Alternus Energy i.e., Alternus Energy and XXL ASA go up and down completely randomly.

Pair Corralation between Alternus Energy and XXL ASA

Assuming the 90 days trading horizon Alternus Energy Group is expected to generate 2.16 times more return on investment than XXL ASA. However, Alternus Energy is 2.16 times more volatile than XXL ASA. It trades about 0.11 of its potential returns per unit of risk. XXL ASA is currently generating about 0.11 per unit of risk. If you would invest  44.00  in Alternus Energy Group on December 29, 2024 and sell it today you would earn a total of  16.00  from holding Alternus Energy Group or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alternus Energy Group  vs.  XXL ASA

Alternus Energy Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alternus Energy Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Alternus Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

XXL ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XXL ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, XXL ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alternus Energy and XXL ASA

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

The idea behind Alternus Energy Group and XXL ASA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.