Correlation Between Aldel Financial and Analog Devices

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

By analyzing existing cross correlation between Aldel Financial II and Analog Devices, you can compare the effects of market volatilities on Aldel Financial and Analog Devices 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 Aldel Financial with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Analog Devices.

Diversification Opportunities for Aldel Financial and Analog Devices

0.28

Correlation Coefficient

Aldel Financial  Analog Devices

Modest diversification

The 3 months correlation between Aldel and Analog is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Aldel Financial i.e., Aldel Financial and Analog Devices go up and down completely randomly.

Pair Corralation between Aldel Financial and Analog Devices

Assuming the 90 days horizon Aldel Financial is expected to generate 11.93 times less return on investment than Analog Devices. But when comparing it to its historical volatility, Aldel Financial II is 19.23 times less risky than Analog Devices. It trades about 0.05 of its potential returns per unit of risk. Analog Devices is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  19,325  in Analog Devices on September 13, 2024 and sell it today you would earn a total of  2,387  from holding Analog Devices or generate 12.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	14.52%
Values	Daily Returns

Aldel Financial II  vs.  Analog Devices

Aldel Financial II

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aldel Financial and Analog Devices

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

The idea behind Aldel Financial II and Analog Devices 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.