Correlation Between Altarea SCA and Altareit

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

By analyzing existing cross correlation between Altarea SCA and Altareit, you can compare the effects of market volatilities on Altarea SCA and Altareit 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 Altareit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altarea SCA and Altareit.

Diversification Opportunities for Altarea SCA and Altareit

0.83

Correlation Coefficient

Altarea SCA  Altareit

Very poor diversification

The 3 months correlation between Altarea and Altareit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Altarea SCA and Altareit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altareit 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 Altareit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altareit has no effect on the direction of Altarea SCA i.e., Altarea SCA and Altareit go up and down completely randomly.

Pair Corralation between Altarea SCA and Altareit

Assuming the 90 days trading horizon Altarea SCA is expected to generate 5.42 times more return on investment than Altareit. However, Altarea SCA is 5.42 times more volatile than Altareit. It trades about 0.11 of its potential returns per unit of risk. Altareit is currently generating about 0.2 per unit of risk. If you would invest  9,610  in Altarea SCA on November 28, 2024 and sell it today you would earn a total of  1,090  from holding Altarea SCA or generate 11.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Altarea SCA  vs.  Altareit

Altarea SCA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altarea SCA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Altarea SCA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Altareit

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altareit are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Altareit is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Altarea SCA and Altareit

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

The idea behind Altarea SCA and Altareit 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 Transaction History module to view history of all your transactions and understand their impact on performance.