Correlation Between Alsea SAB and Electrolux

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

By analyzing existing cross correlation between Alsea SAB de and Electrolux AB Class, you can compare the effects of market volatilities on Alsea SAB and Electrolux 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 Alsea SAB with a short position of Electrolux. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alsea SAB and Electrolux.

Diversification Opportunities for Alsea SAB and Electrolux

0.37

Correlation Coefficient

Alsea SAB  Electrolux

Weak diversification

The 3 months correlation between Alsea and Electrolux is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alsea SAB de and Electrolux AB Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrolux AB Class and Alsea SAB 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 Alsea SAB de are associated (or correlated) with Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrolux AB Class has no effect on the direction of Alsea SAB i.e., Alsea SAB and Electrolux go up and down completely randomly.

Pair Corralation between Alsea SAB and Electrolux

Assuming the 90 days horizon Alsea SAB de is expected to generate 1.03 times more return on investment than Electrolux. However, Alsea SAB is 1.03 times more volatile than Electrolux AB Class. It trades about 0.11 of its potential returns per unit of risk. Electrolux AB Class is currently generating about 0.08 per unit of risk. If you would invest  384.00  in Alsea SAB de on February 18, 2024 and sell it today you would earn a total of  68.00  from holding Alsea SAB de or generate 17.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Alsea SAB de  vs.  Electrolux AB Class

Alsea SAB de

Risk-Adjusted Performance

8 of 100

OK

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

Electrolux AB Class

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electrolux AB Class are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Electrolux showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alsea SAB and Electrolux

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

The idea behind Alsea SAB de and Electrolux AB Class 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.