Correlation Between ALM Equity and AB Sagax

Can any of the company-specific risk be diversified away by investing in both ALM Equity and AB Sagax 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 AB Sagax 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 AB Sagax, you can compare the effects of market volatilities on ALM Equity and AB Sagax 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 AB Sagax. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALM Equity and AB Sagax.

Diversification Opportunities for ALM Equity and AB Sagax

0.48

Correlation Coefficient

ALM Equity  AB Sagax

Very weak diversification

The 3 months correlation between ALM and SAGA-D is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and AB Sagax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Sagax 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 AB Sagax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Sagax has no effect on the direction of ALM Equity i.e., ALM Equity and AB Sagax go up and down completely randomly.

Pair Corralation between ALM Equity and AB Sagax

Assuming the 90 days trading horizon ALM Equity AB is expected to generate 0.85 times more return on investment than AB Sagax. However, ALM Equity AB is 1.17 times less risky than AB Sagax. It trades about 0.15 of its potential returns per unit of risk. AB Sagax is currently generating about 0.09 per unit of risk. If you would invest  7,855  in ALM Equity AB on April 22, 2025 and sell it today you would earn a total of  415.00  from holding ALM Equity AB or generate 5.28% return on investment over 90 days.

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

ALM Equity AB  vs.  AB Sagax

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 11 (%) 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.

AB Sagax

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Sagax are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, AB Sagax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ALM Equity and AB Sagax

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

The idea behind ALM Equity AB and AB Sagax 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.