Correlation Between Allied Electronics and Firstrand
Can any of the company-specific risk be diversified away by investing in both Allied Electronics and Firstrand 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 Electronics and Firstrand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allied Electronics and Firstrand, you can compare the effects of market volatilities on Allied Electronics and Firstrand 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 Electronics with a short position of Firstrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and Firstrand.
Diversification Opportunities for Allied Electronics and Firstrand
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Allied and Firstrand is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and Firstrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firstrand and Allied Electronics 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 Electronics are associated (or correlated) with Firstrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firstrand has no effect on the direction of Allied Electronics i.e., Allied Electronics and Firstrand go up and down completely randomly.
Pair Corralation between Allied Electronics and Firstrand
Assuming the 90 days trading horizon Allied Electronics is expected to generate 1.39 times more return on investment than Firstrand. However, Allied Electronics is 1.39 times more volatile than Firstrand. It trades about 0.18 of its potential returns per unit of risk. Firstrand is currently generating about -0.1 per unit of risk. If you would invest 174,900 in Allied Electronics on September 24, 2024 and sell it today you would earn a total of 38,100 from holding Allied Electronics or generate 21.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Allied Electronics vs. Firstrand
Performance |
Timeline |
Allied Electronics |
Firstrand |
Allied Electronics and Firstrand Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Allied Electronics and Firstrand
The main advantage of trading using opposite Allied Electronics and Firstrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allied Electronics position performs unexpectedly, Firstrand 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 Firstrand will offset losses from the drop in Firstrand's long position.Allied Electronics vs. Safari Investments RSA | Allied Electronics vs. Master Drilling Group | Allied Electronics vs. Bytes Technology | Allied Electronics vs. MC Mining |
Firstrand vs. Allied Electronics | Firstrand vs. RMB Holdings | Firstrand vs. Avi | Firstrand vs. City Lodge Hotels |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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