Correlation Between Allegro Microsystems and Nano Labs

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

By analyzing existing cross correlation between Allegro Microsystems and Nano Labs, you can compare the effects of market volatilities on Allegro Microsystems and Nano Labs 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 Allegro Microsystems with a short position of Nano Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegro Microsystems and Nano Labs.

Diversification Opportunities for Allegro Microsystems and Nano Labs

0.28

Correlation Coefficient

Allegro Microsystems  Nano Labs

Modest diversification

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

Pair Corralation between Allegro Microsystems and Nano Labs

Given the investment horizon of 90 days Allegro Microsystems is expected to generate 0.35 times more return on investment than Nano Labs. However, Allegro Microsystems is 2.84 times less risky than Nano Labs. It trades about 0.13 of its potential returns per unit of risk. Nano Labs is currently generating about -0.04 per unit of risk. If you would invest  2,164  in Allegro Microsystems on October 13, 2024 and sell it today you would earn a total of  132.00  from holding Allegro Microsystems or generate 6.1% return on investment over 90 days.

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

Allegro Microsystems  vs.  Nano Labs

Allegro Microsystems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allegro Microsystems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Allegro Microsystems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nano Labs

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nano Labs are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nano Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegro Microsystems and Nano Labs

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

The idea behind Allegro Microsystems and Nano Labs 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.