Correlation Between Alumina and Demant AS

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

By analyzing existing cross correlation between Alumina Limited and Demant AS ADR, you can compare the effects of market volatilities on Alumina and Demant AS 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 Alumina with a short position of Demant AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alumina and Demant AS.

Diversification Opportunities for Alumina and Demant AS

-0.6

Correlation Coefficient

Alumina  Demant AS

Excellent diversification

The 3 months correlation between Alumina and Demant is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alumina Limited and Demant AS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Demant AS ADR and Alumina 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 Alumina Limited are associated (or correlated) with Demant AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Demant AS ADR has no effect on the direction of Alumina i.e., Alumina and Demant AS go up and down completely randomly.

Pair Corralation between Alumina and Demant AS

If you would invest  111.00  in Alumina Limited on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Alumina Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Alumina Limited  vs.  Demant AS ADR

Alumina Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alumina Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Alumina is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Demant AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Demant AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alumina and Demant AS

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

The idea behind Alumina Limited and Demant AS ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.