Correlation Between Allis Electric and Amtran Technology
Can any of the company-specific risk be diversified away by investing in both Allis Electric and Amtran Technology 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 Amtran Technology 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 Amtran Technology Co, you can compare the effects of market volatilities on Allis Electric and Amtran Technology 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 Amtran Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allis Electric and Amtran Technology.
Diversification Opportunities for Allis Electric and Amtran Technology
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Allis and Amtran is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Allis Electric Co and Amtran Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amtran Technology 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 Amtran Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amtran Technology has no effect on the direction of Allis Electric i.e., Allis Electric and Amtran Technology go up and down completely randomly.
Pair Corralation between Allis Electric and Amtran Technology
Assuming the 90 days trading horizon Allis Electric Co is expected to generate 1.32 times more return on investment than Amtran Technology. However, Allis Electric is 1.32 times more volatile than Amtran Technology Co. It trades about 0.09 of its potential returns per unit of risk. Amtran Technology Co is currently generating about 0.07 per unit of risk. If you would invest 3,050 in Allis Electric Co on September 23, 2024 and sell it today you would earn a total of 6,920 from holding Allis Electric Co or generate 226.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Allis Electric Co vs. Amtran Technology Co
Performance |
Timeline |
Allis Electric |
Amtran Technology |
Allis Electric and Amtran Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Allis Electric and Amtran Technology
The main advantage of trading using opposite Allis Electric and Amtran Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allis Electric position performs unexpectedly, Amtran Technology 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 Amtran Technology will offset losses from the drop in Amtran Technology's long position.Allis Electric vs. Yang Ming Marine | Allis Electric vs. Evergreen Marine Corp | Allis Electric vs. Eva Airways Corp | Allis Electric vs. U Ming Marine Transport |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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