Correlation Between Alfa Holdings and CM Hospitalar

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

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

Diversification Opportunities for Alfa Holdings and CM Hospitalar

0.9

Correlation Coefficient

Alfa Holdings  CM Hospitalar

Almost no diversification

The 3 months correlation between Alfa and VVEO3 is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Holdings SA and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar SA and Alfa Holdings 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 Alfa Holdings SA are associated (or correlated) with CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of Alfa Holdings i.e., Alfa Holdings and CM Hospitalar go up and down completely randomly.

Pair Corralation between Alfa Holdings and CM Hospitalar

Assuming the 90 days trading horizon Alfa Holdings SA is expected to under-perform the CM Hospitalar. But the preferred stock apears to be less risky and, when comparing its historical volatility, Alfa Holdings SA is 1.83 times less risky than CM Hospitalar. The preferred stock trades about -0.35 of its potential returns per unit of risk. The CM Hospitalar SA is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  205.00  in CM Hospitalar SA on December 30, 2024 and sell it today you would lose (67.00) from holding CM Hospitalar SA or give up 32.68% of portfolio value over 90 days.

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

Alfa Holdings SA  vs.  CM Hospitalar SA

Alfa Holdings SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alfa Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CM Hospitalar SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CM Hospitalar SA 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alfa Holdings and CM Hospitalar

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

The idea behind Alfa Holdings SA and CM Hospitalar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.