Correlation Between Allied Industrial and Newretail

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

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

Diversification Opportunities for Allied Industrial and Newretail

0.7

Correlation Coefficient

Allied Industrial  Newretail

Poor diversification

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

Pair Corralation between Allied Industrial and Newretail

Assuming the 90 days trading horizon Allied Industrial is expected to generate 0.42 times more return on investment than Newretail. However, Allied Industrial is 2.39 times less risky than Newretail. It trades about -0.12 of its potential returns per unit of risk. Newretail Co is currently generating about -0.12 per unit of risk. 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

Allied Industrial  vs.  Newretail Co

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.

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.

Pair Trading with Allied Industrial and Newretail

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

The idea behind Allied Industrial and Newretail 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.

Check out your portfolio center.

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.