Correlation Between Central Asia and Alfa Financial

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

By analyzing existing cross correlation between Central Asia Metals and Alfa Financial Software, you can compare the effects of market volatilities on Central Asia and Alfa Financial 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 Central Asia with a short position of Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Alfa Financial.

Diversification Opportunities for Central Asia and Alfa Financial

-0.77

Correlation Coefficient

Central Asia  Alfa Financial

Pay attention - limited upside

The 3 months correlation between Central and Alfa is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software and Central Asia 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 Central Asia Metals are associated (or correlated) with Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of Central Asia i.e., Central Asia and Alfa Financial go up and down completely randomly.

Pair Corralation between Central Asia and Alfa Financial

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Alfa Financial. But the stock apears to be less risky and, when comparing its historical volatility, Central Asia Metals is 1.19 times less risky than Alfa Financial. The stock trades about -0.06 of its potential returns per unit of risk. The Alfa Financial Software is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  21,700  in Alfa Financial Software on September 25, 2024 and sell it today you would lose (200.00) from holding Alfa Financial Software or give up 0.92% of portfolio value over 90 days.

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

Central Asia Metals  vs.  Alfa Financial Software

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Alfa Financial Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Central Asia and Alfa Financial

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

The idea behind Central Asia Metals and Alfa Financial Software 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.