Correlation Between Dlocal and Alarum Technologies

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

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

Diversification Opportunities for Dlocal and Alarum Technologies

-0.39

Correlation Coefficient

Dlocal  Alarum Technologies

Very good diversification

The 3 months correlation between Dlocal and Alarum is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dlocal and Alarum Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarum Technologies and Dlocal 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 Dlocal are associated (or correlated) with Alarum Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarum Technologies has no effect on the direction of Dlocal i.e., Dlocal and Alarum Technologies go up and down completely randomly.

Pair Corralation between Dlocal and Alarum Technologies

Considering the 90-day investment horizon Dlocal is expected to generate 0.43 times more return on investment than Alarum Technologies. However, Dlocal is 2.31 times less risky than Alarum Technologies. It trades about -0.03 of its potential returns per unit of risk. Alarum Technologies is currently generating about -0.02 per unit of risk. If you would invest  1,597  in Dlocal on October 9, 2024 and sell it today you would lose (433.00) from holding Dlocal or give up 27.11% of portfolio value over 90 days.

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

Dlocal  vs.  Alarum Technologies

Dlocal

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dlocal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Dlocal displayed solid returns over the last few months and may actually be approaching a breakup point.

Alarum Technologies

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Alarum Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dlocal and Alarum Technologies

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

The idea behind Dlocal and Alarum Technologies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.