Correlation Between U Ming and Allis Electric

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

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

Diversification Opportunities for U Ming and Allis Electric

0.47

Correlation Coefficient

U Ming  Allis Electric

Very weak diversification

The 3 months correlation between 2606 and Allis is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Allis Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allis Electric and U Ming 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 U Ming Marine Transport 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 U Ming i.e., U Ming and Allis Electric go up and down completely randomly.

Pair Corralation between U Ming and Allis Electric

Assuming the 90 days trading horizon U Ming is expected to generate 3.28 times less return on investment than Allis Electric. But when comparing it to its historical volatility, U Ming Marine Transport is 1.44 times less risky than Allis Electric. It trades about 0.04 of its potential returns per unit of risk. Allis Electric Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,750  in Allis Electric Co on December 5, 2024 and sell it today you would earn a total of  7,050  from holding Allis Electric Co or generate 188.0% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Allis Electric Co

U Ming Marine

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming 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 U Ming and Allis Electric

The main advantage of trading using opposite U Ming and Allis Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Ming 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 U Ming Marine Transport 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..