Correlation Between Allied Industrial and Hi Sharp

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

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

Diversification Opportunities for Allied Industrial and Hi Sharp

-0.4

Correlation Coefficient

Allied Industrial  Hi Sharp

Very good diversification

The 3 months correlation between Allied and 3128 is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and Hi Sharp Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Sharp Electronics 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 Hi Sharp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Sharp Electronics has no effect on the direction of Allied Industrial i.e., Allied Industrial and Hi Sharp go up and down completely randomly.

Pair Corralation between Allied Industrial and Hi Sharp

Assuming the 90 days trading horizon Allied Industrial is expected to under-perform the Hi Sharp. But the stock apears to be less risky and, when comparing its historical volatility, Allied Industrial is 2.79 times less risky than Hi Sharp. The stock trades about -0.13 of its potential returns per unit of risk. The Hi Sharp Electronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,740  in Hi Sharp Electronics on December 30, 2024 and sell it today you would lose (220.00) from holding Hi Sharp Electronics or give up 8.03% of portfolio value over 90 days.

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

Allied Industrial  vs.  Hi Sharp Electronics

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.

Hi Sharp Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Sharp Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hi Sharp 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 Hi Sharp

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

The idea behind Allied Industrial and Hi Sharp Electronics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.