Correlation Between Alpha One and Sustainable Development

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

By analyzing existing cross correlation between Alpha One and Sustainable Development Acquisition, you can compare the effects of market volatilities on Alpha One and Sustainable Development 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 Alpha One with a short position of Sustainable Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha One and Sustainable Development.

Diversification Opportunities for Alpha One and Sustainable Development

0.0

Correlation Coefficient

Alpha One  Sustainable Development

Pay attention - limited upside

The 3 months correlation between Alpha and Sustainable is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alpha One and Sustainable Development Acquis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Development and Alpha One 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 Alpha One are associated (or correlated) with Sustainable Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Development has no effect on the direction of Alpha One i.e., Alpha One and Sustainable Development go up and down completely randomly.

Pair Corralation between Alpha One and Sustainable Development

Given the investment horizon of 90 days Alpha One is expected to generate 23.7 times more return on investment than Sustainable Development. However, Alpha One is 23.7 times more volatile than Sustainable Development Acquisition. It trades about 0.01 of its potential returns per unit of risk. Sustainable Development Acquisition is currently generating about 0.1 per unit of risk. If you would invest  251.00  in Alpha One on October 26, 2024 and sell it today you would lose (97.00) from holding Alpha One or give up 38.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.39%
Values	Daily Returns

Alpha One  vs.  Sustainable Development Acquis

Alpha One

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sustainable Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sustainable Development Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sustainable Development is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alpha One and Sustainable Development

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

The idea behind Alpha One and Sustainable Development Acquisition 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.