Correlation Between Volati AB and ALM Equity

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

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

Diversification Opportunities for Volati AB and ALM Equity

0.8

Correlation Coefficient

Volati AB  ALM Equity

Very poor diversification

The 3 months correlation between Volati and ALM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Volati 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 Volati AB 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 Volati 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 Volati AB i.e., Volati AB and ALM Equity go up and down completely randomly.

Pair Corralation between Volati AB and ALM Equity

Assuming the 90 days trading horizon Volati AB is expected to generate 1.5 times less return on investment than ALM Equity. But when comparing it to its historical volatility, Volati AB is 1.74 times less risky than ALM Equity. It trades about 0.17 of its potential returns per unit of risk. ALM Equity AB is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,855  in ALM Equity AB on April 21, 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	Strong
Accuracy	100.0%
Values	Daily Returns

Volati AB  vs.  ALM Equity AB

Volati AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volati AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Volati AB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Volati AB and ALM Equity

The main advantage of trading using opposite Volati AB and ALM Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volati AB 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 Volati 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.