Correlation Between Colas SA and Alleghany

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

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

Diversification Opportunities for Colas SA and Alleghany

0.66

Correlation Coefficient

Colas SA  Alleghany

Poor diversification

The 3 months correlation between Colas and Alleghany is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Colas SA and Alleghany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alleghany and Colas SA 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 Colas SA are associated (or correlated) with Alleghany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alleghany has no effect on the direction of Colas SA i.e., Colas SA and Alleghany go up and down completely randomly.

Pair Corralation between Colas SA and Alleghany

If you would invest  84,779  in Alleghany on February 1, 2024 and sell it today you would earn a total of  0.00  from holding Alleghany or generate 0.0% return on investment over 90 days.

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

Colas SA  vs.  Alleghany

Colas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Colas SA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Alleghany

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alleghany has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alleghany is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Colas SA and Alleghany

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

The idea behind Colas SA and Alleghany 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.