Correlation Between Altarea SCA and Granite 3x

Can any of the company-specific risk be diversified away by investing in both Altarea SCA and Granite 3x 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 Altarea SCA and Granite 3x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Altarea SCA and Granite 3x LVMH, you can compare the effects of market volatilities on Altarea SCA and Granite 3x 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 Altarea SCA with a short position of Granite 3x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altarea SCA and Granite 3x.

Diversification Opportunities for Altarea SCA and Granite 3x

0.3

Correlation Coefficient

Altarea SCA  Granite 3x

Weak diversification

The 3 months correlation between Altarea and Granite is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Altarea SCA and Granite 3x LVMH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite 3x LVMH and Altarea SCA 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 Altarea SCA are associated (or correlated) with Granite 3x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite 3x LVMH has no effect on the direction of Altarea SCA i.e., Altarea SCA and Granite 3x go up and down completely randomly.

Pair Corralation between Altarea SCA and Granite 3x

Assuming the 90 days trading horizon Altarea SCA is expected to generate 0.23 times more return on investment than Granite 3x. However, Altarea SCA is 4.38 times less risky than Granite 3x. It trades about -0.04 of its potential returns per unit of risk. Granite 3x LVMH is currently generating about -0.09 per unit of risk. If you would invest  10,220  in Altarea SCA on August 31, 2024 and sell it today you would lose (580.00) from holding Altarea SCA or give up 5.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.15%
Values	Daily Returns

Altarea SCA  vs.  Granite 3x LVMH

Altarea SCA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Granite 3x LVMH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Granite 3x LVMH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Altarea SCA and Granite 3x

The main advantage of trading using opposite Altarea SCA and Granite 3x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altarea SCA position performs unexpectedly, Granite 3x 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 Granite 3x will offset losses from the drop in Granite 3x's long position.

The idea behind Altarea SCA and Granite 3x LVMH 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.