Correlation Between Allied Electronics and Granprade

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

By analyzing existing cross correlation between Allied Electronics and Granprade, you can compare the effects of market volatilities on Allied Electronics and Granprade 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 Granprade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allied Electronics and Granprade.

Diversification Opportunities for Allied Electronics and Granprade

-0.73

Correlation Coefficient

Allied Electronics  Granprade

Pay attention - limited upside

The 3 months correlation between Allied and Granprade is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and Granprade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granprade 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 Granprade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granprade has no effect on the direction of Allied Electronics i.e., Allied Electronics and Granprade go up and down completely randomly.

Pair Corralation between Allied Electronics and Granprade

Assuming the 90 days trading horizon Allied Electronics is expected to generate 0.41 times more return on investment than Granprade. However, Allied Electronics is 2.41 times less risky than Granprade. It trades about 0.35 of its potential returns per unit of risk. Granprade is currently generating about -0.11 per unit of risk. If you would invest  199,000  in Allied Electronics on September 24, 2024 and sell it today you would earn a total of  14,000  from holding Allied Electronics or generate 7.04% return on investment over 90 days.

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

Allied Electronics  vs.  Granprade

Allied Electronics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Electronics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Allied Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Granprade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Granprade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Allied Electronics and Granprade

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

The idea behind Allied Electronics and Granprade 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 Stocks Directory module to find actively traded stocks across global markets.