Correlation Between Allied Industrial and Holtek Semiconductor

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

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

Diversification Opportunities for Allied Industrial and Holtek Semiconductor

-0.35

Correlation Coefficient

Allied Industrial  Holtek Semiconductor

Very good diversification

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

Pair Corralation between Allied Industrial and Holtek Semiconductor

Assuming the 90 days trading horizon Allied Industrial is expected to generate 0.48 times more return on investment than Holtek Semiconductor. However, Allied Industrial is 2.09 times less risky than Holtek Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Holtek Semiconductor is currently generating about -0.07 per unit of risk. If you would invest  1,305  in Allied Industrial on October 5, 2024 and sell it today you would earn a total of  35.00  from holding Allied Industrial or generate 2.68% 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.  Holtek Semiconductor

Allied Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Holtek Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holtek Semiconductor 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.

Pair Trading with Allied Industrial and Holtek Semiconductor

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

The idea behind Allied Industrial and Holtek Semiconductor 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 Anywhere module to track or share privately all of your investments from the convenience of any device.