Correlation Between Newretail and Allied Industrial

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

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

Diversification Opportunities for Newretail and Allied Industrial

0.7

Correlation Coefficient

Newretail  Allied Industrial

Poor diversification

The 3 months correlation between Newretail and Allied is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Newretail Co and Allied Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Industrial and Newretail 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 Newretail Co are associated (or correlated) with Allied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Industrial has no effect on the direction of Newretail i.e., Newretail and Allied Industrial go up and down completely randomly.

Pair Corralation between Newretail and Allied Industrial

Assuming the 90 days trading horizon Newretail Co is expected to under-perform the Allied Industrial. In addition to that, Newretail is 2.39 times more volatile than Allied Industrial. It trades about -0.12 of its total potential returns per unit of risk. Allied Industrial is currently generating about -0.12 per unit of volatility. If you would invest  1,325  in Allied Industrial on December 25, 2024 and sell it today you would lose (110.00) from holding Allied Industrial or give up 8.3% of portfolio value over 90 days.

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

Newretail Co  vs.  Allied Industrial

Newretail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newretail Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Allied Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Newretail and Allied Industrial

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

The idea behind Newretail Co and Allied Industrial 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.