Correlation Between GEAR4MUSIC and ALEFARM BREWING

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

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and ALEFARM BREWING DK 05, you can compare the effects of market volatilities on GEAR4MUSIC and ALEFARM BREWING 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 GEAR4MUSIC with a short position of ALEFARM BREWING. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and ALEFARM BREWING.

Diversification Opportunities for GEAR4MUSIC and ALEFARM BREWING

-0.77

Correlation Coefficient

GEAR4MUSIC  ALEFARM BREWING

Pay attention - limited upside

The 3 months correlation between GEAR4MUSIC and ALEFARM is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and ALEFARM BREWING DK 05 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALEFARM BREWING DK and GEAR4MUSIC 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 GEAR4MUSIC LS 10 are associated (or correlated) with ALEFARM BREWING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALEFARM BREWING DK has no effect on the direction of GEAR4MUSIC i.e., GEAR4MUSIC and ALEFARM BREWING go up and down completely randomly.

Pair Corralation between GEAR4MUSIC and ALEFARM BREWING

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to under-perform the ALEFARM BREWING. But the stock apears to be less risky and, when comparing its historical volatility, GEAR4MUSIC LS 10 is 1.43 times less risky than ALEFARM BREWING. The stock trades about -0.15 of its potential returns per unit of risk. The ALEFARM BREWING DK 05 is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  16.00  in ALEFARM BREWING DK 05 on December 30, 2024 and sell it today you would earn a total of  7.00  from holding ALEFARM BREWING DK 05 or generate 43.75% return on investment over 90 days.

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

GEAR4MUSIC LS 10  vs.  ALEFARM BREWING DK 05

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.

ALEFARM BREWING DK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALEFARM BREWING DK 05 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ALEFARM BREWING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEAR4MUSIC and ALEFARM BREWING

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

The idea behind GEAR4MUSIC LS 10 and ALEFARM BREWING DK 05 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.