Correlation Between Allied Industrial and Ji Haw

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

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

Diversification Opportunities for Allied Industrial and Ji Haw

0.36

Correlation Coefficient

Allied Industrial  Ji Haw

Weak diversification

The 3 months correlation between Allied and 3011 is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and Ji Haw Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ji Haw Industrial and Allied Industrial 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 Allied Industrial are associated (or correlated) with Ji Haw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ji Haw Industrial has no effect on the direction of Allied Industrial i.e., Allied Industrial and Ji Haw go up and down completely randomly.

Pair Corralation between Allied Industrial and Ji Haw

Assuming the 90 days trading horizon Allied Industrial is expected to generate 10.9 times less return on investment than Ji Haw. But when comparing it to its historical volatility, Allied Industrial is 1.93 times less risky than Ji Haw. It trades about 0.01 of its potential returns per unit of risk. Ji Haw Industrial Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,760  in Ji Haw Industrial Co on September 16, 2024 and sell it today you would earn a total of  950.00  from holding Ji Haw Industrial Co or generate 53.98% return on investment over 90 days.

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

Allied Industrial  vs.  Ji Haw Industrial Co

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.

Ji Haw Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ji Haw Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ji Haw 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 Allied Industrial and Ji Haw

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

The idea behind Allied Industrial and Ji Haw Industrial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.