Correlation Between Allis Electric and Advanced Energy
Can any of the company-specific risk be diversified away by investing in both Allis Electric and Advanced Energy 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 Advanced Energy 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 Advanced Energy Solution, you can compare the effects of market volatilities on Allis Electric and Advanced Energy 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 Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allis Electric and Advanced Energy.
Diversification Opportunities for Allis Electric and Advanced Energy
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Allis and Advanced is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Allis Electric Co and Advanced Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Solution 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 Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Solution has no effect on the direction of Allis Electric i.e., Allis Electric and Advanced Energy go up and down completely randomly.
Pair Corralation between Allis Electric and Advanced Energy
Assuming the 90 days trading horizon Allis Electric Co is expected to generate 0.62 times more return on investment than Advanced Energy. However, Allis Electric Co is 1.62 times less risky than Advanced Energy. It trades about 0.09 of its potential returns per unit of risk. Advanced Energy Solution is currently generating about -0.06 per unit of risk. If you would invest 10,000 in Allis Electric Co on December 30, 2024 and sell it today you would earn a total of 1,150 from holding Allis Electric Co or generate 11.5% 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. Advanced Energy Solution
Performance |
Timeline |
Allis Electric |
Advanced Energy Solution |
Allis Electric and Advanced Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Allis Electric and Advanced Energy
The main advantage of trading using opposite Allis Electric and Advanced Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allis Electric position performs unexpectedly, Advanced Energy 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 Advanced Energy will offset losses from the drop in Advanced Energy's long position.Allis Electric vs. Chung Hsin Electric Machinery | Allis Electric vs. Fortune Electric Co | Allis Electric vs. TECO Electric Machinery | Allis Electric vs. Shihlin Electric Engineering |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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