Correlation Between Advanced Energy and Allis Electric

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

By analyzing existing cross correlation between Advanced Energy Solution and Allis Electric Co, you can compare the effects of market volatilities on Advanced Energy and Allis Electric 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 Advanced Energy with a short position of Allis Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Energy and Allis Electric.

Diversification Opportunities for Advanced Energy and Allis Electric

-0.76

Correlation Coefficient

Advanced Energy  Allis Electric

Pay attention - limited upside

The 3 months correlation between Advanced and Allis is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Energy Solution and Allis Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allis Electric and Advanced Energy 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 Advanced Energy Solution are associated (or correlated) with Allis Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allis Electric has no effect on the direction of Advanced Energy i.e., Advanced Energy and Allis Electric go up and down completely randomly.

Pair Corralation between Advanced Energy and Allis Electric

Assuming the 90 days trading horizon Advanced Energy is expected to generate 2.43 times less return on investment than Allis Electric. But when comparing it to its historical volatility, Advanced Energy Solution is 1.3 times less risky than Allis Electric. It trades about 0.05 of its potential returns per unit of risk. Allis Electric Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,050  in Allis Electric Co on September 23, 2024 and sell it today you would earn a total of  6,920  from holding Allis Electric Co or generate 226.89% return on investment over 90 days.

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

Advanced Energy Solution  vs.  Allis Electric Co

Advanced Energy Solution

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Allis Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allis Electric 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Advanced Energy and Allis Electric

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

The idea behind Advanced Energy Solution and Allis Electric 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.