Correlation Between ALM Equity and Drillcon

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

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

Diversification Opportunities for ALM Equity and Drillcon

-0.36

Correlation Coefficient

ALM Equity  Drillcon

Very good diversification

The 3 months correlation between ALM and Drillcon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and Drillcon AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drillcon AB and ALM Equity 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 ALM Equity AB are associated (or correlated) with Drillcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drillcon AB has no effect on the direction of ALM Equity i.e., ALM Equity and Drillcon go up and down completely randomly.

Pair Corralation between ALM Equity and Drillcon

Assuming the 90 days trading horizon ALM Equity AB is expected to generate 0.2 times more return on investment than Drillcon. However, ALM Equity AB is 5.11 times less risky than Drillcon. It trades about 0.16 of its potential returns per unit of risk. Drillcon AB is currently generating about -0.1 per unit of risk. If you would invest  7,826  in ALM Equity AB on April 23, 2025 and sell it today you would earn a total of  454.00  from holding ALM Equity AB or generate 5.8% return on investment over 90 days.

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

ALM Equity AB  vs.  Drillcon AB

ALM Equity AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALM Equity AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Drillcon AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drillcon AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ALM Equity and Drillcon

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

The idea behind ALM Equity AB and Drillcon AB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.