Correlation Between Alarm Holdings and Alpha

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

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

Diversification Opportunities for Alarm Holdings and Alpha

-0.08

Correlation Coefficient

Alarm Holdings  Alpha

Good diversification

The 3 months correlation between Alarm and Alpha is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alarm Holdings and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and Alarm 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 Alarm Holdings are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Alarm Holdings i.e., Alarm Holdings and Alpha go up and down completely randomly.

Pair Corralation between Alarm Holdings and Alpha

Given the investment horizon of 90 days Alarm Holdings is expected to generate 0.52 times more return on investment than Alpha. However, Alarm Holdings is 1.91 times less risky than Alpha. It trades about -0.11 of its potential returns per unit of risk. Alpha and Omega is currently generating about -0.12 per unit of risk. If you would invest  5,705  in Alarm Holdings on May 9, 2025 and sell it today you would lose (181.00) from holding Alarm Holdings or give up 3.17% of portfolio value over 90 days.

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

Alarm Holdings  vs.  Alpha and Omega

Alarm Holdings

Risk-Adjusted Performance

Weakest

Over the last 90 days Alarm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alarm Holdings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Alpha and Omega

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha and Omega are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Alpha disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alarm Holdings and Alpha

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

The idea behind Alarm Holdings and Alpha and Omega 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.