Correlation Between Allied Industrial and Sporton International
Can any of the company-specific risk be diversified away by investing in both Allied Industrial and Sporton International 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 Sporton International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Industrial and Sporton International, you can compare the effects of market volatilities on Allied Industrial and Sporton International 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 Sporton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Industrial and Sporton International.
Diversification Opportunities for Allied Industrial and Sporton International
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allied and Sporton is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International 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 Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of Allied Industrial i.e., Allied Industrial and Sporton International go up and down completely randomly.
Pair Corralation between Allied Industrial and Sporton International
Assuming the 90 days trading horizon Allied Industrial is expected to generate 0.37 times more return on investment than Sporton International. However, Allied Industrial is 2.7 times less risky than Sporton International. It trades about 0.04 of its potential returns per unit of risk. Sporton International is currently generating about -0.13 per unit of risk. If you would invest 1,265 in Allied Industrial on September 1, 2024 and sell it today you would earn a total of 5.00 from holding Allied Industrial or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Industrial vs. Sporton International
Performance |
| Timeline |
| Allied Industrial |
| Sporton International |
Allied Industrial and Sporton International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Industrial and Sporton International
The main advantage of trading using opposite Allied Industrial and Sporton International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Industrial position performs unexpectedly, Sporton International 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 Sporton International will offset losses from the drop in Sporton International's long position.| Allied Industrial vs. Simple Mart Retail | Allied Industrial vs. Chung Hwa Food | Allied Industrial vs. Air Asia Co | Allied Industrial vs. PlayNitride |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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