Correlation Between Allied Industrial and Simple Mart
Can any of the company-specific risk be diversified away by investing in both Allied Industrial and Simple Mart 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 Allied Industrial and Simple Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Industrial and Simple Mart Retail, you can compare the effects of market volatilities on Allied Industrial and Simple Mart 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 Allied Industrial with a short position of Simple Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Industrial and Simple Mart.
Diversification Opportunities for Allied Industrial and Simple Mart
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Allied and Simple is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and Simple Mart Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simple Mart Retail and Allied Industrial 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 Allied Industrial are associated (or correlated) with Simple Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simple Mart Retail has no effect on the direction of Allied Industrial i.e., Allied Industrial and Simple Mart go up and down completely randomly.
Pair Corralation between Allied Industrial and Simple Mart
Assuming the 90 days trading horizon Allied Industrial is expected to generate 1.04 times more return on investment than Simple Mart. However, Allied Industrial is 1.04 times more volatile than Simple Mart Retail. It trades about 0.08 of its potential returns per unit of risk. Simple Mart Retail is currently generating about 0.03 per unit of risk. If you would invest 1,260 in Allied Industrial on September 3, 2024 and sell it today you would earn a total of 10.00 from holding Allied Industrial or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Industrial vs. Simple Mart Retail
Performance |
| Timeline |
| Allied Industrial |
| Simple Mart Retail |
Allied Industrial and Simple Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Industrial and Simple Mart
The main advantage of trading using opposite Allied Industrial and Simple Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Industrial position performs unexpectedly, Simple Mart 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 Simple Mart will offset losses from the drop in Simple Mart's long position.| Allied Industrial vs. Delta Electronics | Allied Industrial vs. China Steel Chemical | Allied Industrial vs. WiseChip Semiconductor | Allied Industrial vs. Novatek Microelectronics Corp |
| Simple Mart vs. Taiwan Semiconductor Manufacturing | Simple Mart vs. Hon Hai Precision | Simple Mart vs. MediaTek | Simple Mart vs. Chunghwa Telecom Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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