Correlation Between Allis Electric and Simplo Technology

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

Diversification Opportunities for Allis Electric and Simplo Technology

-0.44

Correlation Coefficient

Allis Electric  Simplo Technology

Very good diversification

The 3 months correlation between Allis and Simplo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Allis Electric Co and Simplo Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplo 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 Simplo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplo Technology has no effect on the direction of Allis Electric i.e., Allis Electric and Simplo Technology go up and down completely randomly.

Pair Corralation between Allis Electric and Simplo Technology

Assuming the 90 days trading horizon Allis Electric Co is expected to generate 1.86 times more return on investment than Simplo Technology. However, Allis Electric is 1.86 times more volatile than Simplo Technology Co. It trades about 0.09 of its potential returns per unit of risk. Simplo Technology Co is currently generating about 0.04 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Allis Electric Co  vs.  Simplo Technology Co

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.

Simplo Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simplo Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Simplo Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Allis Electric and Simplo Technology

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

The idea behind Allis Electric Co and Simplo Technology Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..