Correlation Between American Aires and Allied Motion

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

By analyzing existing cross correlation between American Aires and Allied Motion Technologies, you can compare the effects of market volatilities on American Aires and Allied Motion 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 American Aires with a short position of Allied Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Aires and Allied Motion.

Diversification Opportunities for American Aires and Allied Motion

-0.72

Correlation Coefficient

American Aires  Allied Motion

Pay attention - limited upside

The 3 months correlation between American and Allied is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Aires and Allied Motion Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Motion Techno and American Aires 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 American Aires are associated (or correlated) with Allied Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Motion Techno has no effect on the direction of American Aires i.e., American Aires and Allied Motion go up and down completely randomly.

Pair Corralation between American Aires and Allied Motion

If you would invest  3,917  in Allied Motion Technologies on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Allied Motion Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

American Aires  vs.  Allied Motion Technologies

American Aires

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Aires has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Allied Motion Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Motion Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with American Aires and Allied Motion

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

The idea behind American Aires and Allied Motion Technologies 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.