Correlation Between Niko Semiconductor and Allied Industrial

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

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

Diversification Opportunities for Niko Semiconductor and Allied Industrial

-0.56

Correlation Coefficient

Niko Semiconductor  Allied Industrial

Excellent diversification

The 3 months correlation between Niko and Allied is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Niko Semiconductor Co and Allied Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Industrial and Niko Semiconductor 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 Niko Semiconductor 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 Niko Semiconductor i.e., Niko Semiconductor and Allied Industrial go up and down completely randomly.

Pair Corralation between Niko Semiconductor and Allied Industrial

Assuming the 90 days trading horizon Niko Semiconductor Co is expected to under-perform the Allied Industrial. In addition to that, Niko Semiconductor is 1.54 times more volatile than Allied Industrial. It trades about -0.03 of its total potential returns per unit of risk. Allied Industrial is currently generating about 0.01 per unit of volatility. If you would invest  1,280  in Allied Industrial on October 20, 2024 and sell it today you would earn a total of  5.00  from holding Allied Industrial or generate 0.39% return on investment over 90 days.

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

Niko Semiconductor Co  vs.  Allied Industrial

Niko Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Niko Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Niko Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Allied Industrial

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, Allied Industrial 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 Niko Semiconductor and Allied Industrial

The main advantage of trading using opposite Niko Semiconductor and Allied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Niko Semiconductor 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 Niko Semiconductor 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.