Correlation Between LED IBond and Alefarm Brewing

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

By analyzing existing cross correlation between LED iBond International and Alefarm Brewing AS, you can compare the effects of market volatilities on LED IBond 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 LED IBond with a short position of Alefarm Brewing. Check out your portfolio center. Please also check ongoing floating volatility patterns of LED IBond and Alefarm Brewing.

Diversification Opportunities for LED IBond and Alefarm Brewing

-0.54

Correlation Coefficient

LED IBond  Alefarm Brewing

Excellent diversification

The 3 months correlation between LED and Alefarm is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding LED iBond International and Alefarm Brewing AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alefarm Brewing AS and LED IBond 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 LED iBond International 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 AS has no effect on the direction of LED IBond i.e., LED IBond and Alefarm Brewing go up and down completely randomly.

Pair Corralation between LED IBond and Alefarm Brewing

Assuming the 90 days trading horizon LED iBond International is expected to generate 3.9 times more return on investment than Alefarm Brewing. However, LED IBond is 3.9 times more volatile than Alefarm Brewing AS. It trades about 0.06 of its potential returns per unit of risk. Alefarm Brewing AS is currently generating about 0.02 per unit of risk. If you would invest  34.00  in LED iBond International on October 4, 2024 and sell it today you would lose (3.00) from holding LED iBond International or give up 8.82% of portfolio value over 90 days.

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

LED iBond International  vs.  Alefarm Brewing AS

LED iBond International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LED iBond International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, LED IBond displayed solid returns over the last few months and may actually be approaching a breakup point.

Alefarm Brewing AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alefarm Brewing AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with LED IBond and Alefarm Brewing

The main advantage of trading using opposite LED IBond and Alefarm Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LED IBond 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 LED iBond International and Alefarm Brewing AS 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.