Correlation Between Alfen NV and VERTIV HOLCL

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

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

Diversification Opportunities for Alfen NV and VERTIV HOLCL

-0.58

Correlation Coefficient

Alfen NV  VERTIV HOLCL

Excellent diversification

The 3 months correlation between Alfen and VERTIV is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Alfen NV and VERTIV HOLCL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERTIV HOLCL A and Alfen NV 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 Alfen NV are associated (or correlated) with VERTIV HOLCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERTIV HOLCL A has no effect on the direction of Alfen NV i.e., Alfen NV and VERTIV HOLCL go up and down completely randomly.

Pair Corralation between Alfen NV and VERTIV HOLCL

Assuming the 90 days horizon Alfen NV is expected to generate 0.89 times more return on investment than VERTIV HOLCL. However, Alfen NV is 1.13 times less risky than VERTIV HOLCL. It trades about 0.05 of its potential returns per unit of risk. VERTIV HOLCL A is currently generating about -0.16 per unit of risk. If you would invest  1,127  in Alfen NV on September 27, 2024 and sell it today you would earn a total of  24.00  from holding Alfen NV or generate 2.13% return on investment over 90 days.

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

Alfen NV  vs.  VERTIV HOLCL A

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

VERTIV HOLCL A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VERTIV HOLCL A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VERTIV HOLCL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alfen NV and VERTIV HOLCL

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

The idea behind Alfen NV and VERTIV HOLCL A 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.