Correlation Between Shihlin Electric and Allis Electric
Can any of the company-specific risk be diversified away by investing in both Shihlin Electric and Allis Electric 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 Shihlin Electric and Allis Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shihlin Electric Engineering and Allis Electric Co, you can compare the effects of market volatilities on Shihlin Electric and Allis Electric 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 Shihlin Electric with a short position of Allis Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shihlin Electric and Allis Electric.
Diversification Opportunities for Shihlin Electric and Allis Electric
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Shihlin and Allis is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Shihlin Electric Engineering and Allis Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allis Electric and Shihlin Electric 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 Shihlin Electric Engineering are associated (or correlated) with Allis Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allis Electric has no effect on the direction of Shihlin Electric i.e., Shihlin Electric and Allis Electric go up and down completely randomly.
Pair Corralation between Shihlin Electric and Allis Electric
Assuming the 90 days trading horizon Shihlin Electric Engineering is expected to generate 0.93 times more return on investment than Allis Electric. However, Shihlin Electric Engineering is 1.08 times less risky than Allis Electric. It trades about -0.03 of its potential returns per unit of risk. Allis Electric Co is currently generating about -0.04 per unit of risk. If you would invest 18,900 in Shihlin Electric Engineering on November 3, 2024 and sell it today you would lose (250.00) from holding Shihlin Electric Engineering or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shihlin Electric Engineering vs. Allis Electric Co
Performance |
| Timeline |
| Shihlin Electric Eng |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Allis Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Shihlin Electric and Allis Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shihlin Electric and Allis Electric
The main advantage of trading using opposite Shihlin Electric and Allis Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shihlin Electric position performs unexpectedly, Allis Electric 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 Allis Electric will offset losses from the drop in Allis Electric's long position.The idea behind Shihlin Electric Engineering and Allis Electric Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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