Correlation Between Allied Electronics and Investec
Can any of the company-specific risk be diversified away by investing in both Allied Electronics and Investec 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 Electronics and Investec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Electronics and Investec, you can compare the effects of market volatilities on Allied Electronics and Investec 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 Electronics with a short position of Investec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and Investec.
Diversification Opportunities for Allied Electronics and Investec
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Allied and Investec is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec and Allied Electronics 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 Electronics are associated (or correlated) with Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of Allied Electronics i.e., Allied Electronics and Investec go up and down completely randomly.
Pair Corralation between Allied Electronics and Investec
Assuming the 90 days trading horizon Allied Electronics is expected to generate 0.91 times more return on investment than Investec. However, Allied Electronics is 1.1 times less risky than Investec. It trades about 0.18 of its potential returns per unit of risk. Investec is currently generating about -0.09 per unit of risk. If you would invest 185,900 in Allied Electronics on August 30, 2024 and sell it today you would earn a total of 12,600 from holding Allied Electronics or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Electronics vs. Investec
Performance |
| Timeline |
| Allied Electronics |
| Investec |
Allied Electronics and Investec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Electronics and Investec
The main advantage of trading using opposite Allied Electronics and Investec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Electronics position performs unexpectedly, Investec 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 Investec will offset losses from the drop in Investec's long position.| Allied Electronics vs. Harmony Gold Mining | Allied Electronics vs. Copper 360 | Allied Electronics vs. Lesaka Technologies | Allied Electronics vs. African Media Entertainment |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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