Correlation Between Alpha Trust and Dromeas SA

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

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

Diversification Opportunities for Alpha Trust and Dromeas SA

0.19

Correlation Coefficient

Alpha Trust  Dromeas SA

Average diversification

The 3 months correlation between Alpha and Dromeas is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Trust Mutual and Dromeas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dromeas SA and Alpha Trust 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 Trust Mutual are associated (or correlated) with Dromeas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dromeas SA has no effect on the direction of Alpha Trust i.e., Alpha Trust and Dromeas SA go up and down completely randomly.

Pair Corralation between Alpha Trust and Dromeas SA

Assuming the 90 days trading horizon Alpha Trust is expected to generate 13.58 times less return on investment than Dromeas SA. But when comparing it to its historical volatility, Alpha Trust Mutual is 9.57 times less risky than Dromeas SA. It trades about 0.05 of its potential returns per unit of risk. Dromeas SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Dromeas SA on December 24, 2024 and sell it today you would earn a total of  4.00  from holding Dromeas SA or generate 12.9% return on investment over 90 days.

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

Alpha Trust Mutual  vs.  Dromeas SA

Alpha Trust Mutual

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Trust Mutual are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alpha Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Dromeas SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dromeas SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dromeas SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha Trust and Dromeas SA

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

The idea behind Alpha Trust Mutual and Dromeas SA 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.