Correlation Between ALM Equity and SinterCast

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

Diversification Opportunities for ALM Equity and SinterCast

0.73

Correlation Coefficient

ALM Equity  SinterCast

Poor diversification

The 3 months correlation between ALM and SinterCast is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ALM Equity AB and SinterCast AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SinterCast 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 SinterCast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SinterCast AB has no effect on the direction of ALM Equity i.e., ALM Equity and SinterCast go up and down completely randomly.

Pair Corralation between ALM Equity and SinterCast

Assuming the 90 days trading horizon ALM Equity is expected to generate 2.75 times less return on investment than SinterCast. But when comparing it to its historical volatility, ALM Equity AB is 2.4 times less risky than SinterCast. It trades about 0.15 of its potential returns per unit of risk. SinterCast AB is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  10,037  in SinterCast AB on April 20, 2025 and sell it today you would earn a total of  1,463  from holding SinterCast AB or generate 14.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

ALM Equity AB  vs.  SinterCast 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 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.

SinterCast AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SinterCast AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, SinterCast unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALM Equity and SinterCast

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

The idea behind ALM Equity AB and SinterCast 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.