Correlation Between Graham Holdings and Alfa Financial

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

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

Diversification Opportunities for Graham Holdings and Alfa Financial

0.65

Correlation Coefficient

Graham Holdings  Alfa Financial

Poor diversification

The 3 months correlation between Graham and Alfa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software and Graham 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 Graham Holdings Co are associated (or correlated) with Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of Graham Holdings i.e., Graham Holdings and Alfa Financial go up and down completely randomly.

Pair Corralation between Graham Holdings and Alfa Financial

Assuming the 90 days trading horizon Graham Holdings Co is expected to generate 1.11 times more return on investment than Alfa Financial. However, Graham Holdings is 1.11 times more volatile than Alfa Financial Software. It trades about 0.05 of its potential returns per unit of risk. Alfa Financial Software is currently generating about 0.05 per unit of risk. If you would invest  83,831  in Graham Holdings Co on December 21, 2024 and sell it today you would earn a total of  4,169  from holding Graham Holdings Co or generate 4.97% return on investment over 90 days.

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

Graham Holdings Co  vs.  Alfa Financial Software

Graham Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graham Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Alfa Financial Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Graham Holdings and Alfa Financial

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

The idea behind Graham Holdings Co and Alfa Financial Software 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 Transaction History module to view history of all your transactions and understand their impact on performance.