Correlation Between Packages and Altern Energy

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

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

Diversification Opportunities for Packages and Altern Energy

0.71

Correlation Coefficient

Packages  Altern Energy

Poor diversification

The 3 months correlation between Packages and Altern is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Altern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altern Energy and Packages 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 Packages are associated (or correlated) with Altern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altern Energy has no effect on the direction of Packages i.e., Packages and Altern Energy go up and down completely randomly.

Pair Corralation between Packages and Altern Energy

Assuming the 90 days trading horizon Packages is expected to generate 2.73 times less return on investment than Altern Energy. But when comparing it to its historical volatility, Packages is 1.07 times less risky than Altern Energy. It trades about 0.04 of its potential returns per unit of risk. Altern Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,433  in Altern Energy on October 9, 2024 and sell it today you would earn a total of  958.00  from holding Altern Energy or generate 66.85% return on investment over 90 days.

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

Packages  vs.  Altern Energy

Packages

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Packages are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Packages sustained solid returns over the last few months and may actually be approaching a breakup point.

Altern Energy

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altern Energy are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Altern Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Packages and Altern Energy

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

The idea behind Packages and Altern Energy 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 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.