Correlation Between Lupatech and Alfa Holdings

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

By analyzing existing cross correlation between Lupatech SA and Alfa Holdings SA, you can compare the effects of market volatilities on Lupatech and Alfa Holdings 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 Lupatech with a short position of Alfa Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lupatech and Alfa Holdings.

Diversification Opportunities for Lupatech and Alfa Holdings

-0.41

Correlation Coefficient

Lupatech  Alfa Holdings

Very good diversification

The 3 months correlation between Lupatech and Alfa is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lupatech SA and Alfa Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Holdings SA and Lupatech 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 Lupatech SA are associated (or correlated) with Alfa Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Holdings SA has no effect on the direction of Lupatech i.e., Lupatech and Alfa Holdings go up and down completely randomly.

Pair Corralation between Lupatech and Alfa Holdings

Assuming the 90 days trading horizon Lupatech SA is expected to under-perform the Alfa Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Lupatech SA is 1.45 times less risky than Alfa Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Alfa Holdings SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  895.00  in Alfa Holdings SA on September 15, 2024 and sell it today you would earn a total of  14.00  from holding Alfa Holdings SA or generate 1.56% return on investment over 90 days.

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

Lupatech SA  vs.  Alfa Holdings SA

Lupatech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lupatech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Alfa Holdings SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Holdings SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lupatech and Alfa Holdings

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

The idea behind Lupatech SA and Alfa Holdings SA 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.