Correlation Between Allied Industrial and Sinopower Semiconductor

Can any of the company-specific risk be diversified away by investing in both Allied Industrial and Sinopower 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 Sinopower 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 Sinopower Semiconductor, you can compare the effects of market volatilities on Allied Industrial and Sinopower 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 Sinopower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Industrial and Sinopower Semiconductor.

Diversification Opportunities for Allied Industrial and Sinopower Semiconductor

-0.05

Correlation Coefficient

Allied Industrial  Sinopower Semiconductor

Good diversification

The 3 months correlation between Allied and Sinopower is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Allied Industrial and Sinopower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopower 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 Sinopower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopower Semiconductor has no effect on the direction of Allied Industrial i.e., Allied Industrial and Sinopower Semiconductor go up and down completely randomly.

Pair Corralation between Allied Industrial and Sinopower Semiconductor

Assuming the 90 days trading horizon Allied Industrial is expected to generate 0.68 times more return on investment than Sinopower Semiconductor. However, Allied Industrial is 1.47 times less risky than Sinopower Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Sinopower Semiconductor is currently generating about -0.05 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.  Sinopower 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.

Sinopower Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Allied Industrial and Sinopower 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..