Correlation Between SinterCast and ALM Equity

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

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

Diversification Opportunities for SinterCast and ALM Equity

0.86

Correlation Coefficient

SinterCast  ALM Equity

Very poor diversification

The 3 months correlation between SinterCast and ALM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SinterCast AB and ALM Equity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Equity AB and SinterCast 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 SinterCast AB are associated (or correlated) with ALM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Equity AB has no effect on the direction of SinterCast i.e., SinterCast and ALM Equity go up and down completely randomly.

Pair Corralation between SinterCast and ALM Equity

Assuming the 90 days trading horizon SinterCast AB is expected to generate 2.38 times more return on investment than ALM Equity. However, SinterCast is 2.38 times more volatile than ALM Equity AB. It trades about 0.17 of its potential returns per unit of risk. ALM Equity AB is currently generating about 0.15 per unit of risk. If you would invest  10,037  in SinterCast AB on April 22, 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	Strong
Accuracy	100.0%
Values	Daily Returns

SinterCast AB  vs.  ALM Equity AB

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 uncertain basic indicators, SinterCast unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with SinterCast and ALM Equity

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

The idea behind SinterCast AB and ALM Equity 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.