Correlation Between Allied Industrial and United Radiant

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

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

Diversification Opportunities for Allied Industrial and United Radiant

-0.35

Correlation Coefficient

Allied Industrial  United Radiant

Very good diversification

The 3 months correlation between Allied and United is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and United Radiant Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Radiant Technology 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 United Radiant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Radiant Technology has no effect on the direction of Allied Industrial i.e., Allied Industrial and United Radiant go up and down completely randomly.

Pair Corralation between Allied Industrial and United Radiant

Assuming the 90 days trading horizon Allied Industrial is expected to under-perform the United Radiant. But the stock apears to be less risky and, when comparing its historical volatility, Allied Industrial is 1.32 times less risky than United Radiant. The stock trades about -0.1 of its potential returns per unit of risk. The United Radiant Technology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,075  in United Radiant Technology on December 22, 2024 and sell it today you would earn a total of  230.00  from holding United Radiant Technology or generate 11.08% return on investment over 90 days.

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

Allied Industrial  vs.  United Radiant Technology

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 weak 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.

United Radiant Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Radiant Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, United Radiant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Industrial and United Radiant

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

The idea behind Allied Industrial and United Radiant Technology 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.