Correlation Between Bowler Metcalf and Allied Electronics
Can any of the company-specific risk be diversified away by investing in both Bowler Metcalf and Allied Electronics 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 Bowler Metcalf and Allied Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bowler Metcalf and Allied Electronics, you can compare the effects of market volatilities on Bowler Metcalf and Allied Electronics 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 Bowler Metcalf with a short position of Allied Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bowler Metcalf and Allied Electronics.
Diversification Opportunities for Bowler Metcalf and Allied Electronics
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bowler and Allied is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bowler Metcalf and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and Bowler Metcalf 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 Bowler Metcalf are associated (or correlated) with Allied Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Electronics has no effect on the direction of Bowler Metcalf i.e., Bowler Metcalf and Allied Electronics go up and down completely randomly.
Pair Corralation between Bowler Metcalf and Allied Electronics
Assuming the 90 days trading horizon Bowler Metcalf is expected to generate 1.26 times less return on investment than Allied Electronics. But when comparing it to its historical volatility, Bowler Metcalf is 1.33 times less risky than Allied Electronics. It trades about 0.23 of its potential returns per unit of risk. Allied Electronics is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 182,900 in Allied Electronics on August 28, 2024 and sell it today you would earn a total of 16,100 from holding Allied Electronics or generate 8.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bowler Metcalf vs. Allied Electronics
Performance |
| Timeline |
| Bowler Metcalf |
| Allied Electronics |
Bowler Metcalf and Allied Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bowler Metcalf and Allied Electronics
The main advantage of trading using opposite Bowler Metcalf and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bowler Metcalf position performs unexpectedly, Allied Electronics 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 Allied Electronics will offset losses from the drop in Allied Electronics' long position.| Bowler Metcalf vs. Datatec | Bowler Metcalf vs. Deneb Investments | Bowler Metcalf vs. City Lodge Hotels | Bowler Metcalf vs. Zeder Investments |
| Allied Electronics vs. Deneb Investments | Allied Electronics vs. Reinet Investments SCA | Allied Electronics vs. Lesaka Technologies | Allied Electronics vs. Afine Investments |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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