Correlation Between Allied Blenders and Credo Brands

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

By analyzing existing cross correlation between Allied Blenders Distillers and Credo Brands Marketing, you can compare the effects of market volatilities on Allied Blenders and Credo Brands 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 Blenders with a short position of Credo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Blenders and Credo Brands.

Diversification Opportunities for Allied Blenders and Credo Brands

0.17

Correlation Coefficient

Allied Blenders  Credo Brands

Average diversification

The 3 months correlation between Allied and Credo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Allied Blenders Distillers and Credo Brands Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Brands Marketing and Allied Blenders 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 Blenders Distillers are associated (or correlated) with Credo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Brands Marketing has no effect on the direction of Allied Blenders i.e., Allied Blenders and Credo Brands go up and down completely randomly.

Pair Corralation between Allied Blenders and Credo Brands

Assuming the 90 days trading horizon Allied Blenders Distillers is expected to generate 0.77 times more return on investment than Credo Brands. However, Allied Blenders Distillers is 1.3 times less risky than Credo Brands. It trades about 0.58 of its potential returns per unit of risk. Credo Brands Marketing is currently generating about -0.15 per unit of risk. If you would invest  35,060  in Allied Blenders Distillers on October 6, 2024 and sell it today you would earn a total of  8,685  from holding Allied Blenders Distillers or generate 24.77% return on investment over 90 days.

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

Allied Blenders Distillers  vs.  Credo Brands Marketing

Allied Blenders Dist

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allied Blenders unveiled solid returns over the last few months and may actually be approaching a breakup point.

Credo Brands Marketing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credo Brands Marketing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Credo Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Allied Blenders and Credo Brands

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

The idea behind Allied Blenders Distillers and Credo Brands Marketing 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.