Correlation Between Allient and Globalfoundries
Can any of the company-specific risk be diversified away by investing in both Allient and Globalfoundries 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 Allient and Globalfoundries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allient and Globalfoundries, you can compare the effects of market volatilities on Allient and Globalfoundries 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 Allient with a short position of Globalfoundries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allient and Globalfoundries.
Diversification Opportunities for Allient and Globalfoundries
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allient and Globalfoundries is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Allient and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Allient 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 Allient are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Allient i.e., Allient and Globalfoundries go up and down completely randomly.
Pair Corralation between Allient and Globalfoundries
Given the investment horizon of 90 days Allient is expected to generate 1.1 times more return on investment than Globalfoundries. However, Allient is 1.1 times more volatile than Globalfoundries. It trades about -0.01 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.02 per unit of risk. If you would invest 3,667 in Allient on September 3, 2024 and sell it today you would lose (1,070) from holding Allient or give up 29.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allient vs. Globalfoundries
Performance |
| Timeline |
| Allient |
| Globalfoundries |
Allient and Globalfoundries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allient and Globalfoundries
The main advantage of trading using opposite Allient and Globalfoundries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allient position performs unexpectedly, Globalfoundries 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 Globalfoundries will offset losses from the drop in Globalfoundries' long position.The idea behind Allient and Globalfoundries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Globalfoundries vs. NXP Semiconductors NV | Globalfoundries vs. Analog Devices | Globalfoundries vs. ON Semiconductor | Globalfoundries vs. Lattice Semiconductor |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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