Correlation Between Alleghany and Colas SA

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

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

Diversification Opportunities for Alleghany and Colas SA

0.66

Correlation Coefficient

Alleghany  Colas SA

Poor diversification

The 3 months correlation between Alleghany and Colas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alleghany and Colas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colas SA and Alleghany 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 Alleghany are associated (or correlated) with Colas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colas SA has no effect on the direction of Alleghany i.e., Alleghany and Colas SA go up and down completely randomly.

Pair Corralation between Alleghany and Colas SA

If you would invest  35,973  in Colas SA on January 19, 2024 and sell it today you would earn a total of  1,097  from holding Colas SA or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.33%
Values	Daily Returns

Alleghany  vs.  Colas SA

Alleghany

Risk-Adjusted Performance

0 of 100

Very Weak

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

Colas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Colas SA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alleghany and Colas SA

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

The idea behind Alleghany and Colas SA 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.