Correlation Between Allied Electronics and Shoprite Holdings
Can any of the company-specific risk be diversified away by investing in both Allied Electronics and Shoprite Holdings 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 Shoprite Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Electronics and Shoprite Holdings, you can compare the effects of market volatilities on Allied Electronics and Shoprite Holdings 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 Shoprite Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and Shoprite Holdings.
Diversification Opportunities for Allied Electronics and Shoprite Holdings
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Allied and Shoprite is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and Shoprite Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite Holdings 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Allied Electronics i.e., Allied Electronics and Shoprite Holdings go up and down completely randomly.
Pair Corralation between Allied Electronics and Shoprite Holdings
Assuming the 90 days trading horizon Allied Electronics is expected to generate 1.66 times more return on investment than Shoprite Holdings. However, Allied Electronics is 1.66 times more volatile than Shoprite Holdings. It trades about 0.12 of its potential returns per unit of risk. Shoprite Holdings is currently generating about 0.07 per unit of risk. If you would invest 76,900 in Allied Electronics on August 28, 2024 and sell it today you would earn a total of 122,100 from holding Allied Electronics or generate 158.78% 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. Shoprite Holdings
Performance |
| Timeline |
| Allied Electronics |
| Shoprite Holdings |
Allied Electronics and Shoprite Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Electronics and Shoprite Holdings
The main advantage of trading using opposite Allied Electronics and Shoprite Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Electronics position performs unexpectedly, Shoprite Holdings 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 Shoprite Holdings will offset losses from the drop in Shoprite Holdings' long position.| Allied Electronics vs. Deneb Investments | Allied Electronics vs. Reinet Investments SCA | Allied Electronics vs. Lesaka Technologies | Allied Electronics vs. Afine Investments |
| Shoprite Holdings vs. CA Sales Holdings | Shoprite Holdings vs. Kap Industrial Holdings | Shoprite Holdings vs. Deneb Investments | Shoprite Holdings vs. City Lodge Hotels |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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