Correlation Between CA Sales and Allied Electronics
Can any of the company-specific risk be diversified away by investing in both CA Sales 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 CA Sales and Allied Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CA Sales Holdings and Allied Electronics, you can compare the effects of market volatilities on CA Sales 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 CA Sales with a short position of Allied Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CA Sales and Allied Electronics.
Diversification Opportunities for CA Sales and Allied Electronics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CAA and Allied is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CA Sales Holdings and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and CA Sales 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 CA Sales Holdings 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 CA Sales i.e., CA Sales and Allied Electronics go up and down completely randomly.
Pair Corralation between CA Sales and Allied Electronics
Assuming the 90 days trading horizon CA Sales is expected to generate 19.47 times less return on investment than Allied Electronics. In addition to that, CA Sales is 1.14 times more volatile than Allied Electronics. It trades about 0.01 of its total potential returns per unit of risk. Allied Electronics is currently generating about 0.23 per unit of volatility. 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CA Sales Holdings vs. Allied Electronics
Performance |
| Timeline |
| CA Sales Holdings |
| Allied Electronics |
CA Sales and Allied Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CA Sales and Allied Electronics
The main advantage of trading using opposite CA Sales and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CA Sales 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.| CA Sales vs. Sasol Ltd Bee | CA Sales vs. Growthpoint Properties | CA Sales vs. AfricaRhodium ETF | CA Sales vs. CoreShares Preference Share |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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