Correlation Between Allied Electronics and Sabvest Capital

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

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

Diversification Opportunities for Allied Electronics and Sabvest Capital

0.73

Correlation Coefficient

Allied Electronics  Sabvest Capital

Poor diversification

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

Pair Corralation between Allied Electronics and Sabvest Capital

Assuming the 90 days trading horizon Allied Electronics is expected to under-perform the Sabvest Capital. But the stock apears to be less risky and, when comparing its historical volatility, Allied Electronics is 1.05 times less risky than Sabvest Capital. The stock trades about -0.06 of its potential returns per unit of risk. The Sabvest Capital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  912,400  in Sabvest Capital on December 24, 2024 and sell it today you would earn a total of  7,600  from holding Sabvest Capital or generate 0.83% return on investment over 90 days.

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

Allied Electronics  vs.  Sabvest Capital

Allied Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Electronics 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.

Sabvest Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabvest Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Sabvest Capital 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 Sabvest Capital

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

The idea behind Allied Electronics and Sabvest Capital 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.