Correlation Between Rexon Industrial and Allis Electric

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

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

Diversification Opportunities for Rexon Industrial and Allis Electric

0.55

Correlation Coefficient

Rexon Industrial  Allis Electric

Very weak diversification

The 3 months correlation between Rexon and Allis is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rexon Industrial Corp and Allis Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allis Electric and Rexon Industrial 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 Rexon Industrial Corp are associated (or correlated) with Allis Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allis Electric has no effect on the direction of Rexon Industrial i.e., Rexon Industrial and Allis Electric go up and down completely randomly.

Pair Corralation between Rexon Industrial and Allis Electric

Assuming the 90 days trading horizon Rexon Industrial Corp is expected to generate 0.47 times more return on investment than Allis Electric. However, Rexon Industrial Corp is 2.13 times less risky than Allis Electric. It trades about 0.55 of its potential returns per unit of risk. Allis Electric Co is currently generating about 0.23 per unit of risk. If you would invest  3,140  in Rexon Industrial Corp on December 4, 2024 and sell it today you would earn a total of  535.00  from holding Rexon Industrial Corp or generate 17.04% return on investment over 90 days.

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

Rexon Industrial Corp  vs.  Allis Electric Co

Rexon Industrial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rexon Industrial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Rexon Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Allis Electric

Risk-Adjusted Performance

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 fairly stable basic indicators, Allis Electric is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rexon Industrial and Allis Electric

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

The idea behind Rexon Industrial Corp and Allis Electric 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.