Correlation Between Signify NV and Alfen NV

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

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

Diversification Opportunities for Signify NV and Alfen NV

0.02

Correlation Coefficient

Signify NV  Alfen NV

Significant diversification

The 3 months correlation between Signify and Alfen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Signify NV and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV and Signify NV 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 Signify NV are associated (or correlated) with Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of Signify NV i.e., Signify NV and Alfen NV go up and down completely randomly.

Pair Corralation between Signify NV and Alfen NV

Assuming the 90 days horizon Signify NV is expected to generate 0.76 times more return on investment than Alfen NV. However, Signify NV is 1.32 times less risky than Alfen NV. It trades about -0.01 of its potential returns per unit of risk. Alfen NV is currently generating about -0.18 per unit of risk. If you would invest  1,175  in Signify NV on August 31, 2024 and sell it today you would lose (25.00) from holding Signify NV or give up 2.13% of portfolio value over 90 days.

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

Signify NV  vs.  Alfen NV

Signify NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signify NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Signify NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Signify NV and Alfen NV

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

The idea behind Signify NV and Alfen NV 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.