Correlation Between Sella Real and Alrov Properties

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

By analyzing existing cross correlation between Sella Real Estate and Alrov Properties Lodgings, you can compare the effects of market volatilities on Sella Real and Alrov Properties 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 Sella Real with a short position of Alrov Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sella Real and Alrov Properties.

Diversification Opportunities for Sella Real and Alrov Properties

0.74

Correlation Coefficient

Sella Real  Alrov Properties

Poor diversification

The 3 months correlation between Sella and Alrov is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sella Real Estate and Alrov Properties Lodgings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alrov Properties Lodgings and Sella Real 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 Sella Real Estate are associated (or correlated) with Alrov Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alrov Properties Lodgings has no effect on the direction of Sella Real i.e., Sella Real and Alrov Properties go up and down completely randomly.

Pair Corralation between Sella Real and Alrov Properties

Assuming the 90 days trading horizon Sella Real Estate is expected to under-perform the Alrov Properties. But the stock apears to be less risky and, when comparing its historical volatility, Sella Real Estate is 1.29 times less risky than Alrov Properties. The stock trades about -0.06 of its potential returns per unit of risk. The Alrov Properties Lodgings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,721,000  in Alrov Properties Lodgings on December 4, 2024 and sell it today you would earn a total of  139,000  from holding Alrov Properties Lodgings or generate 8.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.04%
Values	Daily Returns

Sella Real Estate  vs.  Alrov Properties Lodgings

Sella Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sella Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sella Real is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Alrov Properties Lodgings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alrov Properties Lodgings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Alrov Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sella Real and Alrov Properties

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

The idea behind Sella Real Estate and Alrov Properties Lodgings 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 Anywhere module to track or share privately all of your investments from the convenience of any device.