Correlation Between Bentley Systems and Alarm Holdings

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

By analyzing existing cross correlation between Bentley Systems and Alarm Holdings, you can compare the effects of market volatilities on Bentley Systems and Alarm Holdings 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 Bentley Systems with a short position of Alarm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bentley Systems and Alarm Holdings.

Diversification Opportunities for Bentley Systems and Alarm Holdings

0.83

Correlation Coefficient

Bentley Systems  Alarm Holdings

Very poor diversification

The 3 months correlation between Bentley and Alarm is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bentley Systems and Alarm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarm Holdings and Bentley Systems 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 Bentley Systems are associated (or correlated) with Alarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarm Holdings has no effect on the direction of Bentley Systems i.e., Bentley Systems and Alarm Holdings go up and down completely randomly.

Pair Corralation between Bentley Systems and Alarm Holdings

Considering the 90-day investment horizon Bentley Systems is expected to under-perform the Alarm Holdings. In addition to that, Bentley Systems is 1.26 times more volatile than Alarm Holdings. It trades about -0.17 of its total potential returns per unit of risk. Alarm Holdings is currently generating about -0.1 per unit of volatility. If you would invest  6,106  in Alarm Holdings on December 28, 2024 and sell it today you would lose (525.00) from holding Alarm Holdings or give up 8.6% of portfolio value over 90 days.

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

Bentley Systems  vs.  Alarm Holdings

Bentley Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bentley Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Alarm Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alarm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bentley Systems and Alarm Holdings

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

The idea behind Bentley Systems and Alarm Holdings 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..