Correlation Between Allis Electric and Shihlin Electric

Can any of the company-specific risk be diversified away by investing in both Allis Electric and Shihlin Electric 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 Allis Electric and Shihlin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allis Electric Co and Shihlin Electric Engineering, you can compare the effects of market volatilities on Allis Electric and Shihlin Electric 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 Allis Electric with a short position of Shihlin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allis Electric and Shihlin Electric.

Diversification Opportunities for Allis Electric and Shihlin Electric

0.92

Correlation Coefficient

Allis Electric  Shihlin Electric

Almost no diversification

The 3 months correlation between Allis and Shihlin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Allis Electric Co and Shihlin Electric Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shihlin Electric Eng and Allis Electric 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 Allis Electric Co are associated (or correlated) with Shihlin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shihlin Electric Eng has no effect on the direction of Allis Electric i.e., Allis Electric and Shihlin Electric go up and down completely randomly.

Pair Corralation between Allis Electric and Shihlin Electric

Assuming the 90 days trading horizon Allis Electric Co is expected to under-perform the Shihlin Electric. In addition to that, Allis Electric is 1.16 times more volatile than Shihlin Electric Engineering. It trades about -0.1 of its total potential returns per unit of risk. Shihlin Electric Engineering is currently generating about -0.07 per unit of volatility. If you would invest  21,300  in Shihlin Electric Engineering on September 16, 2024 and sell it today you would lose (2,150) from holding Shihlin Electric Engineering or give up 10.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Allis Electric Co  vs.  Shihlin Electric Engineering

Allis Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allis Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Shihlin Electric Eng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shihlin Electric Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Allis Electric and Shihlin Electric

The main advantage of trading using opposite Allis Electric and Shihlin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allis Electric position performs unexpectedly, Shihlin Electric 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 Shihlin Electric will offset losses from the drop in Shihlin Electric's long position.

The idea behind Allis Electric Co and Shihlin Electric Engineering 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.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.