Correlation Between ALERION CLEANPOWER and GEAR4MUSIC

Can any of the company-specific risk be diversified away by investing in both ALERION CLEANPOWER and GEAR4MUSIC 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 ALERION CLEANPOWER and GEAR4MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALERION CLEANPOWER and GEAR4MUSIC LS 10, you can compare the effects of market volatilities on ALERION CLEANPOWER and GEAR4MUSIC 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 ALERION CLEANPOWER with a short position of GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALERION CLEANPOWER and GEAR4MUSIC.

Diversification Opportunities for ALERION CLEANPOWER and GEAR4MUSIC

0.54

Correlation Coefficient

ALERION CLEANPOWER  GEAR4MUSIC

Very weak diversification

The 3 months correlation between ALERION and GEAR4MUSIC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 and ALERION CLEANPOWER 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 ALERION CLEANPOWER are associated (or correlated) with GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of ALERION CLEANPOWER i.e., ALERION CLEANPOWER and GEAR4MUSIC go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and GEAR4MUSIC

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to generate 1.26 times more return on investment than GEAR4MUSIC. However, ALERION CLEANPOWER is 1.26 times more volatile than GEAR4MUSIC LS 10. It trades about -0.04 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about -0.15 per unit of risk. If you would invest  1,592  in ALERION CLEANPOWER on December 30, 2024 and sell it today you would lose (174.00) from holding ALERION CLEANPOWER or give up 10.93% of portfolio value over 90 days.

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

ALERION CLEANPOWER  vs.  GEAR4MUSIC LS 10

ALERION CLEANPOWER

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALERION CLEANPOWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GEAR4MUSIC LS 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ALERION CLEANPOWER and GEAR4MUSIC

The main advantage of trading using opposite ALERION CLEANPOWER and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALERION CLEANPOWER position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.

The idea behind ALERION CLEANPOWER and GEAR4MUSIC LS 10 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.