Correlation Between Allied Electronics and Tiger Brands
Can any of the company-specific risk be diversified away by investing in both Allied Electronics and Tiger Brands 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 Tiger Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Electronics and Tiger Brands, you can compare the effects of market volatilities on Allied Electronics and Tiger Brands 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 Tiger Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and Tiger Brands.
Diversification Opportunities for Allied Electronics and Tiger Brands
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Allied and Tiger is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and Tiger Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiger Brands 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 Tiger Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiger Brands has no effect on the direction of Allied Electronics i.e., Allied Electronics and Tiger Brands go up and down completely randomly.
Pair Corralation between Allied Electronics and Tiger Brands
Assuming the 90 days trading horizon Allied Electronics is expected to generate 2.13 times more return on investment than Tiger Brands. However, Allied Electronics is 2.13 times more volatile than Tiger Brands. It trades about 0.19 of its potential returns per unit of risk. Tiger Brands is currently generating about 0.13 per unit of risk. If you would invest 175,000 in Allied Electronics on September 3, 2024 and sell it today you would earn a total of 27,000 from holding Allied Electronics or generate 15.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allied Electronics vs. Tiger Brands
Performance |
| Timeline |
| Allied Electronics |
| Tiger Brands |
Allied Electronics and Tiger Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allied Electronics and Tiger Brands
The main advantage of trading using opposite Allied Electronics and Tiger Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Electronics position performs unexpectedly, Tiger Brands 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 Tiger Brands will offset losses from the drop in Tiger Brands' long position.| Allied Electronics vs. Lesaka Technologies | Allied Electronics vs. Astral Foods | Allied Electronics vs. Kap Industrial Holdings | Allied Electronics vs. Reinet Investments SCA |
| Tiger Brands vs. Avi | Tiger Brands vs. RCL Foods | Tiger Brands vs. Oceana | Tiger Brands vs. Libstar 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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