Correlation Between Athens General and Alpha Trust

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

By analyzing existing cross correlation between Athens General Composite and Alpha Trust Mutual, you can compare the effects of market volatilities on Athens General and Alpha Trust 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 Athens General with a short position of Alpha Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Athens General and Alpha Trust.

Diversification Opportunities for Athens General and Alpha Trust

0.04

Correlation Coefficient

Athens General  Alpha Trust

Significant diversification

The 3 months correlation between Athens and Alpha is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Athens General Composite and Alpha Trust Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Trust Mutual and Athens General 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 Athens General Composite are associated (or correlated) with Alpha Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Trust Mutual has no effect on the direction of Athens General i.e., Athens General and Alpha Trust go up and down completely randomly.

Pair Corralation between Athens General and Alpha Trust

Assuming the 90 days trading horizon Athens General Composite is expected to generate 2.03 times more return on investment than Alpha Trust. However, Athens General is 2.03 times more volatile than Alpha Trust Mutual. It trades about 0.33 of its potential returns per unit of risk. Alpha Trust Mutual is currently generating about -0.03 per unit of risk. If you would invest  146,967  in Athens General Composite on December 31, 2024 and sell it today you would earn a total of  26,601  from holding Athens General Composite or generate 18.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Athens General Composite  vs.  Alpha Trust Mutual

Pair Trading with Athens General and Alpha Trust

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

The idea behind Athens General Composite and Alpha Trust Mutual 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.