Correlation Between Compagnie and Alan Allman

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

By analyzing existing cross correlation between Compagnie de Chemins and Alan Allman Associates, you can compare the effects of market volatilities on Compagnie and Alan Allman 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 Compagnie with a short position of Alan Allman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Alan Allman.

Diversification Opportunities for Compagnie and Alan Allman

-0.54

Correlation Coefficient

Compagnie  Alan Allman

Excellent diversification

The 3 months correlation between Compagnie and Alan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie de Chemins and Alan Allman Associates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alan Allman Associates and Compagnie 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 Compagnie de Chemins are associated (or correlated) with Alan Allman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alan Allman Associates has no effect on the direction of Compagnie i.e., Compagnie and Alan Allman go up and down completely randomly.

Pair Corralation between Compagnie and Alan Allman

Assuming the 90 days trading horizon Compagnie de Chemins is expected to generate 1.03 times more return on investment than Alan Allman. However, Compagnie is 1.03 times more volatile than Alan Allman Associates. It trades about 0.2 of its potential returns per unit of risk. Alan Allman Associates is currently generating about -0.01 per unit of risk. If you would invest  70,000  in Compagnie de Chemins on April 22, 2025 and sell it today you would earn a total of  21,500  from holding Compagnie de Chemins or generate 30.71% return on investment over 90 days.

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

Compagnie de Chemins  vs.  Alan Allman Associates

Compagnie de Chemins

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Chemins are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Compagnie reported solid returns over the last few months and may actually be approaching a breakup point.

Alan Allman Associates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alan Allman Associates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alan Allman is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compagnie and Alan Allman

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

The idea behind Compagnie de Chemins and Alan Allman Associates 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.