Correlation Between Autoliv and Allego
Can any of the company-specific risk be diversified away by investing in both Autoliv and Allego 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 Autoliv and Allego into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autoliv and Allego Inc, you can compare the effects of market volatilities on Autoliv and Allego 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 Autoliv with a short position of Allego. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autoliv and Allego.
Diversification Opportunities for Autoliv and Allego
Good diversification
The 3 months correlation between Autoliv and Allego is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Allego Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allego Inc and Autoliv 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 Autoliv are associated (or correlated) with Allego. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allego Inc has no effect on the direction of Autoliv i.e., Autoliv and Allego go up and down completely randomly.
Pair Corralation between Autoliv and Allego
Considering the 90-day investment horizon Autoliv is expected to under-perform the Allego. But the stock apears to be less risky and, when comparing its historical volatility, Autoliv is 8.77 times less risky than Allego. The stock trades about -0.08 of its potential returns per unit of risk. The Allego Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 77.00 in Allego Inc on September 1, 2024 and sell it today you would earn a total of 114.00 from holding Allego Inc or generate 148.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.75% |
| Values | Daily Returns |
Autoliv vs. Allego Inc
Performance |
| Timeline |
| Autoliv |
| Allego Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Autoliv and Allego Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autoliv and Allego
The main advantage of trading using opposite Autoliv and Allego positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv position performs unexpectedly, Allego 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 Allego will offset losses from the drop in Allego's long position.The idea behind Autoliv and Allego Inc 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.| Allego vs. Lear Corporation | Allego vs. Autoliv | Allego vs. American Axle Manufacturing | Allego vs. Dorman Products |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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