Correlation Between Allied Electronics and MTN
Can any of the company-specific risk be diversified away by investing in both Allied Electronics and MTN 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 MTN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Electronics and MTN Group, you can compare the effects of market volatilities on Allied Electronics and MTN 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 MTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and MTN.
Diversification Opportunities for Allied Electronics and MTN
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Allied and MTN is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and MTN Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group 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 MTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group has no effect on the direction of Allied Electronics i.e., Allied Electronics and MTN go up and down completely randomly.
Pair Corralation between Allied Electronics and MTN
Assuming the 90 days trading horizon Allied Electronics is expected to generate 1.44 times more return on investment than MTN. However, Allied Electronics is 1.44 times more volatile than MTN Group. It trades about 0.19 of its potential returns per unit of risk. MTN Group is currently generating about -0.25 per unit of risk. If you would invest 188,000 in Allied Electronics on August 31, 2024 and sell it today you would earn a total of 14,000 from holding Allied Electronics or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Electronics vs. MTN Group
Performance |
| Timeline |
| Allied Electronics |
| MTN Group |
Allied Electronics and MTN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Electronics and MTN
The main advantage of trading using opposite Allied Electronics and MTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Electronics position performs unexpectedly, MTN 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 MTN will offset losses from the drop in MTN's long position.| Allied Electronics vs. Centaur Bci Balanced | Allied Electronics vs. Sabvest Capital | Allied Electronics vs. AfricaRhodium ETF | Allied Electronics vs. Indexco Limited |
| MTN vs. Brimstone Investment | MTN vs. Allied Electronics | MTN vs. ABSA Bank Limited | MTN vs. CA Sales Holdings |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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