Correlation Between IA Invest and Alm Brand

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

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

Diversification Opportunities for IA Invest and Alm Brand

0.63

Correlation Coefficient

IA Invest  Alm Brand

Poor diversification

The 3 months correlation between IAIACVF and Alm is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IA Invest Advice and Alm Brand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alm Brand and IA Invest 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 IA Invest Advice are associated (or correlated) with Alm Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alm Brand has no effect on the direction of IA Invest i.e., IA Invest and Alm Brand go up and down completely randomly.

Pair Corralation between IA Invest and Alm Brand

Assuming the 90 days trading horizon IA Invest Advice is expected to generate 0.83 times more return on investment than Alm Brand. However, IA Invest Advice is 1.2 times less risky than Alm Brand. It trades about 0.1 of its potential returns per unit of risk. Alm Brand is currently generating about -0.02 per unit of risk. If you would invest  12,035  in IA Invest Advice on September 23, 2024 and sell it today you would earn a total of  1,643  from holding IA Invest Advice or generate 13.65% return on investment over 90 days.

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

IA Invest Advice  vs.  Alm Brand

IA Invest Advice

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA Invest Advice are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IA Invest may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alm Brand

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alm Brand are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Alm Brand may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IA Invest and Alm Brand

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

The idea behind IA Invest Advice and Alm Brand 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.