Correlation Between UOL Group and Alfa Laval

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

By analyzing existing cross correlation between UOL Group Ltd and Alfa Laval AB, you can compare the effects of market volatilities on UOL Group and Alfa Laval 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 UOL Group with a short position of Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of UOL Group and Alfa Laval.

Diversification Opportunities for UOL Group and Alfa Laval

0.8

Correlation Coefficient

UOL Group  Alfa Laval

Very poor diversification

The 3 months correlation between UOL and Alfa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding UOL Group Ltd and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and UOL Group 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 UOL Group Ltd are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of UOL Group i.e., UOL Group and Alfa Laval go up and down completely randomly.

Pair Corralation between UOL Group and Alfa Laval

Assuming the 90 days horizon UOL Group Ltd is expected to generate 2.26 times more return on investment than Alfa Laval. However, UOL Group is 2.26 times more volatile than Alfa Laval AB. It trades about -0.06 of its potential returns per unit of risk. Alfa Laval AB is currently generating about -0.15 per unit of risk. If you would invest  1,580  in UOL Group Ltd on October 12, 2024 and sell it today you would lose (59.00) from holding UOL Group Ltd or give up 3.73% of portfolio value over 90 days.

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

UOL Group Ltd  vs.  Alfa Laval AB

UOL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UOL Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alfa Laval AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Laval AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with UOL Group and Alfa Laval

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

The idea behind UOL Group Ltd and Alfa Laval AB 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.