Correlation Between VHAI and Alarum Technologies

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

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

Diversification Opportunities for VHAI and Alarum Technologies

-0.31

Correlation Coefficient

VHAI  Alarum Technologies

Very good diversification

The 3 months correlation between VHAI and Alarum is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and Alarum Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarum Technologies and VHAI 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 VHAI are associated (or correlated) with Alarum Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarum Technologies has no effect on the direction of VHAI i.e., VHAI and Alarum Technologies go up and down completely randomly.

Pair Corralation between VHAI and Alarum Technologies

Given the investment horizon of 90 days VHAI is expected to under-perform the Alarum Technologies. In addition to that, VHAI is 1.54 times more volatile than Alarum Technologies. It trades about -0.01 of its total potential returns per unit of risk. Alarum Technologies is currently generating about 0.02 per unit of volatility. If you would invest  1,308  in Alarum Technologies on September 13, 2024 and sell it today you would lose (92.00) from holding Alarum Technologies or give up 7.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

VHAI  vs.  Alarum Technologies

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, VHAI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Alarum Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alarum Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Alarum Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with VHAI and Alarum Technologies

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

The idea behind VHAI and Alarum Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.