Correlation Between Alphanam and Cotec Construction

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

By analyzing existing cross correlation between Alphanam ME and Cotec Construction JSC, you can compare the effects of market volatilities on Alphanam and Cotec Construction 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 Alphanam with a short position of Cotec Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphanam and Cotec Construction.

Diversification Opportunities for Alphanam and Cotec Construction

-0.62

Correlation Coefficient

Alphanam  Cotec Construction

Excellent diversification

The 3 months correlation between Alphanam and Cotec is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alphanam ME and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC and Alphanam 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 Alphanam ME are associated (or correlated) with Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of Alphanam i.e., Alphanam and Cotec Construction go up and down completely randomly.

Pair Corralation between Alphanam and Cotec Construction

Assuming the 90 days trading horizon Alphanam is expected to generate 103.35 times less return on investment than Cotec Construction. But when comparing it to its historical volatility, Alphanam ME is 1.64 times less risky than Cotec Construction. It trades about 0.01 of its potential returns per unit of risk. Cotec Construction JSC is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  7,180,000  in Cotec Construction JSC on December 2, 2024 and sell it today you would earn a total of  2,020,000  from holding Cotec Construction JSC or generate 28.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	52.38%
Values	Daily Returns

Alphanam ME  vs.  Cotec Construction JSC

Alphanam ME

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphanam ME has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Alphanam is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cotec Construction JSC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cotec Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphanam and Cotec Construction

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

The idea behind Alphanam ME and Cotec Construction JSC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.