Correlation Between EAC Invest and Alm Brand

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

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

Diversification Opportunities for EAC Invest and Alm Brand

0.31

Correlation Coefficient

EAC Invest  Alm Brand

Weak diversification

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

Pair Corralation between EAC Invest and Alm Brand

Assuming the 90 days trading horizon EAC Invest AS is expected to generate 0.74 times more return on investment than Alm Brand. However, EAC Invest AS is 1.34 times less risky than Alm Brand. It trades about -0.25 of its potential returns per unit of risk. Alm Brand is currently generating about -0.27 per unit of risk. If you would invest  1,120,000  in EAC Invest AS on January 29, 2024 and sell it today you would lose (60,000) from holding EAC Invest AS or give up 5.36% of portfolio value over 90 days.

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

EAC Invest AS  vs.  Alm Brand

EAC Invest AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EAC Invest AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Alm Brand

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EAC Invest and Alm Brand

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

The idea behind EAC Invest AS and Alm Brand 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.