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

0.8

Correlation Coefficient

U Ming  Allis Electric

Very poor diversification

The 3 months correlation between 2606 and Allis is 0.8. 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 Marine Transport is expected to generate 1.22 times more return on investment than Allis Electric. However, U Ming is 1.22 times more volatile than Allis Electric Co. It trades about 0.11 of its potential returns per unit of risk. Allis Electric Co is currently generating about 0.09 per unit of risk. If you would invest  5,890  in U Ming Marine Transport on December 28, 2024 and sell it today you would earn a total of  1,010  from holding U Ming Marine Transport or generate 17.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.21%
Values	Daily Returns

U Ming Marine Transport  vs.  Allis Electric Co

U Ming Marine

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 8 (%) 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allis Electric Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Allis Electric showed solid returns over the last few months and may actually be approaching a breakup point.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.