Correlation Between Allied Electronics and FNB ETN

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

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

Diversification Opportunities for Allied Electronics and FNB ETN

0.75

Correlation Coefficient

Allied Electronics  FNB ETN

Poor diversification

The 3 months correlation between Allied and FNB is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Allied Electronics and FNB ETN JPMORGQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB ETN JPMORGQ 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 FNB ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB ETN JPMORGQ has no effect on the direction of Allied Electronics i.e., Allied Electronics and FNB ETN go up and down completely randomly.

Pair Corralation between Allied Electronics and FNB ETN

Assuming the 90 days trading horizon Allied Electronics is expected to generate 1.52 times more return on investment than FNB ETN. However, Allied Electronics is 1.52 times more volatile than FNB ETN JPMORGQ. It trades about 0.14 of its potential returns per unit of risk. FNB ETN JPMORGQ is currently generating about 0.17 per unit of risk. If you would invest  99,900  in Allied Electronics on October 22, 2024 and sell it today you would earn a total of  118,800  from holding Allied Electronics or generate 118.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	56.73%
Values	Daily Returns

Allied Electronics  vs.  FNB ETN JPMORGQ

Allied Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Electronics are ranked lower than 9 (%) 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.

FNB ETN JPMORGQ

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FNB ETN JPMORGQ are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FNB ETN sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Electronics and FNB ETN

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

The idea behind Allied Electronics and FNB ETN JPMORGQ 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.