Correlation Between Teraplast Bist and Alumil Rom

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

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

Diversification Opportunities for Teraplast Bist and Alumil Rom

0.73

Correlation Coefficient

Teraplast Bist  Alumil Rom

Poor diversification

The 3 months correlation between Teraplast and Alumil is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Teraplast Bist and Alumil Rom Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Rom Industry and Teraplast Bist 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 Teraplast Bist are associated (or correlated) with Alumil Rom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Rom Industry has no effect on the direction of Teraplast Bist i.e., Teraplast Bist and Alumil Rom go up and down completely randomly.

Pair Corralation between Teraplast Bist and Alumil Rom

Assuming the 90 days trading horizon Teraplast Bist is expected to under-perform the Alumil Rom. In addition to that, Teraplast Bist is 1.01 times more volatile than Alumil Rom Industry. It trades about -0.02 of its total potential returns per unit of risk. Alumil Rom Industry is currently generating about 0.08 per unit of volatility. If you would invest  156.00  in Alumil Rom Industry on October 9, 2024 and sell it today you would earn a total of  118.00  from holding Alumil Rom Industry or generate 75.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Teraplast Bist  vs.  Alumil Rom Industry

Teraplast Bist

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alumil Rom Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Teraplast Bist and Alumil Rom

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

The idea behind Teraplast Bist and Alumil Rom Industry 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.