Correlation Between Alliance Select and Top Frontier

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

By analyzing existing cross correlation between Alliance Select Foods and Top Frontier Investment, you can compare the effects of market volatilities on Alliance Select and Top Frontier 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 Alliance Select with a short position of Top Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Select and Top Frontier.

Diversification Opportunities for Alliance Select and Top Frontier

0.35

Correlation Coefficient

Alliance Select  Top Frontier

Weak diversification

The 3 months correlation between Alliance and Top is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and Top Frontier Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Frontier Investment and Alliance Select 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 Alliance Select Foods are associated (or correlated) with Top Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Frontier Investment has no effect on the direction of Alliance Select i.e., Alliance Select and Top Frontier go up and down completely randomly.

Pair Corralation between Alliance Select and Top Frontier

Assuming the 90 days trading horizon Alliance Select Foods is expected to generate 2.24 times more return on investment than Top Frontier. However, Alliance Select is 2.24 times more volatile than Top Frontier Investment. It trades about 0.15 of its potential returns per unit of risk. Top Frontier Investment is currently generating about -0.01 per unit of risk. If you would invest  40.00  in Alliance Select Foods on December 31, 2024 and sell it today you would earn a total of  10.00  from holding Alliance Select Foods or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.83%
Values	Daily Returns

Alliance Select Foods  vs.  Top Frontier Investment

Alliance Select Foods

Risk-Adjusted Performance

Good

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

Top Frontier Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Top Frontier Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Top Frontier is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alliance Select and Top Frontier

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

The idea behind Alliance Select Foods and Top Frontier Investment 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.