Correlation Between Alrov Properties and Elco

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

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

Diversification Opportunities for Alrov Properties and Elco

0.54

Correlation Coefficient

Alrov Properties  Elco

Very weak diversification

The 3 months correlation between Alrov and Elco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alrov Properties Lodgings and Elco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elco and Alrov Properties 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 Alrov Properties Lodgings are associated (or correlated) with Elco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elco has no effect on the direction of Alrov Properties i.e., Alrov Properties and Elco go up and down completely randomly.

Pair Corralation between Alrov Properties and Elco

Assuming the 90 days trading horizon Alrov Properties Lodgings is expected to generate 0.84 times more return on investment than Elco. However, Alrov Properties Lodgings is 1.19 times less risky than Elco. It trades about 0.08 of its potential returns per unit of risk. Elco is currently generating about -0.16 per unit of risk. If you would invest  1,473,000  in Alrov Properties Lodgings on February 2, 2024 and sell it today you would earn a total of  65,000  from holding Alrov Properties Lodgings or generate 4.41% return on investment over 90 days.

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

Alrov Properties Lodgings  vs.  Elco

Alrov Properties Lodgings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Alrov Properties Lodgings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Alrov Properties unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elco

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Elco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Elco may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Alrov Properties and Elco

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

The idea behind Alrov Properties Lodgings and Elco 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.