Correlation Between Allis Electric and Anderson Industrial

Can any of the company-specific risk be diversified away by investing in both Allis Electric and Anderson Industrial 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 Anderson Industrial 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 Anderson Industrial Corp, you can compare the effects of market volatilities on Allis Electric and Anderson Industrial 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 Anderson Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allis Electric and Anderson Industrial.

Diversification Opportunities for Allis Electric and Anderson Industrial

0.86

Correlation Coefficient

Allis Electric  Anderson Industrial

Very poor diversification

The 3 months correlation between Allis and Anderson is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Allis Electric Co and Anderson Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anderson Industrial Corp 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 Anderson Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anderson Industrial Corp has no effect on the direction of Allis Electric i.e., Allis Electric and Anderson Industrial go up and down completely randomly.

Pair Corralation between Allis Electric and Anderson Industrial

Assuming the 90 days trading horizon Allis Electric Co is expected to generate 0.67 times more return on investment than Anderson Industrial. However, Allis Electric Co is 1.5 times less risky than Anderson Industrial. It trades about -0.14 of its potential returns per unit of risk. Anderson Industrial Corp is currently generating about -0.12 per unit of risk. If you would invest  11,600  in Allis Electric Co on October 20, 2024 and sell it today you would lose (2,180) from holding Allis Electric Co or give up 18.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Allis Electric Co  vs.  Anderson Industrial Corp

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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Anderson Industrial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anderson Industrial Corp 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Allis Electric and Anderson Industrial

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

The idea behind Allis Electric Co and Anderson Industrial Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.