Correlation Between Allied Electronics and Impala Platinum

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

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

Diversification Opportunities for Allied Electronics and Impala Platinum

-0.63

Correlation Coefficient

Allied Electronics  Impala Platinum

Excellent diversification

The 3 months correlation between Allied and Impala is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and Impala Platinum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impala Platinum Holdings 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 Impala Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impala Platinum Holdings has no effect on the direction of Allied Electronics i.e., Allied Electronics and Impala Platinum go up and down completely randomly.

Pair Corralation between Allied Electronics and Impala Platinum

Assuming the 90 days trading horizon Allied Electronics is expected to generate 0.7 times more return on investment than Impala Platinum. However, Allied Electronics is 1.44 times less risky than Impala Platinum. It trades about 0.09 of its potential returns per unit of risk. Impala Platinum Holdings is currently generating about -0.02 per unit of risk. If you would invest  86,877  in Allied Electronics on October 11, 2024 and sell it today you would earn a total of  143,123  from holding Allied Electronics or generate 164.74% 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.  Impala Platinum Holdings

Allied Electronics

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Electronics are ranked lower than 18 (%) 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.

Impala Platinum Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impala Platinum Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Impala Platinum is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allied Electronics and Impala Platinum

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

The idea behind Allied Electronics and Impala Platinum Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.