Correlation Between Moens Bank and Alefarm Brewing

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

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

Diversification Opportunities for Moens Bank and Alefarm Brewing

0.26

Correlation Coefficient

Moens Bank  Alefarm Brewing

Modest diversification

The 3 months correlation between Moens and Alefarm is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Moens Bank AS 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 Moens Bank 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 Moens Bank AS 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 Moens Bank i.e., Moens Bank and Alefarm Brewing go up and down completely randomly.

Pair Corralation between Moens Bank and Alefarm Brewing

Assuming the 90 days trading horizon Moens Bank AS is expected to generate 0.43 times more return on investment than Alefarm Brewing. However, Moens Bank AS is 2.33 times less risky than Alefarm Brewing. It trades about -0.01 of its potential returns per unit of risk. Alefarm Brewing AS is currently generating about -0.03 per unit of risk. If you would invest  23,000  in Moens Bank AS on September 16, 2024 and sell it today you would lose (400.00) from holding Moens Bank AS or give up 1.74% of portfolio value over 90 days.

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

Moens Bank AS  vs.  Alefarm Brewing AS

Moens Bank AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moens Bank AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Moens Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 somewhat strong technical and fundamental indicators, Alefarm Brewing is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Moens Bank and Alefarm Brewing

The main advantage of trading using opposite Moens Bank and Alefarm Brewing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moens Bank 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 Moens Bank AS 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.