Correlation Between Lecron Energy and Allied Machinery

Can any of the company-specific risk be diversified away by investing in both Lecron Energy and Allied Machinery 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 Lecron Energy and Allied Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lecron Energy Saving and Allied Machinery Co, you can compare the effects of market volatilities on Lecron Energy and Allied Machinery 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 Lecron Energy with a short position of Allied Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lecron Energy and Allied Machinery.

Diversification Opportunities for Lecron Energy and Allied Machinery

-0.11

Correlation Coefficient

Lecron Energy  Allied Machinery

Good diversification

The 3 months correlation between Lecron and Allied is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lecron Energy Saving and Allied Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Machinery and Lecron Energy 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 Lecron Energy Saving are associated (or correlated) with Allied Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Machinery has no effect on the direction of Lecron Energy i.e., Lecron Energy and Allied Machinery go up and down completely randomly.

Pair Corralation between Lecron Energy and Allied Machinery

Assuming the 90 days trading horizon Lecron Energy is expected to generate 23.05 times less return on investment than Allied Machinery. In addition to that, Lecron Energy is 1.22 times more volatile than Allied Machinery Co. It trades about 0.01 of its total potential returns per unit of risk. Allied Machinery Co is currently generating about 0.15 per unit of volatility. If you would invest  1,425  in Allied Machinery Co on October 23, 2024 and sell it today you would earn a total of  513.00  from holding Allied Machinery Co or generate 36.0% return on investment over 90 days.

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

Lecron Energy Saving  vs.  Allied Machinery Co

Lecron Energy Saving

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lecron Energy Saving has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lecron Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Allied Machinery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Machinery Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allied Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lecron Energy and Allied Machinery

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

The idea behind Lecron Energy Saving and Allied Machinery 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..