Correlation Between American Superconductor and Alfa Laval

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

By analyzing existing cross correlation between American Superconductor and Alfa Laval AB, you can compare the effects of market volatilities on American Superconductor and Alfa Laval 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 American Superconductor with a short position of Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Superconductor and Alfa Laval.

Diversification Opportunities for American Superconductor and Alfa Laval

-0.49

Correlation Coefficient

American Superconductor  Alfa Laval

Very good diversification

The 3 months correlation between American and Alfa is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Superconductor and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and American Superconductor 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 American Superconductor are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of American Superconductor i.e., American Superconductor and Alfa Laval go up and down completely randomly.

Pair Corralation between American Superconductor and Alfa Laval

Given the investment horizon of 90 days American Superconductor is expected to under-perform the Alfa Laval. In addition to that, American Superconductor is 4.63 times more volatile than Alfa Laval AB. It trades about -0.02 of its total potential returns per unit of risk. Alfa Laval AB is currently generating about 0.07 per unit of volatility. If you would invest  4,234  in Alfa Laval AB on December 26, 2024 and sell it today you would earn a total of  246.00  from holding Alfa Laval AB or generate 5.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Superconductor  vs.  Alfa Laval AB

American Superconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Superconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Alfa Laval AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Alfa Laval may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Superconductor and Alfa Laval

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

The idea behind American Superconductor and Alfa Laval AB 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.