Correlation Between Allient and China Gas

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

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

Diversification Opportunities for Allient and China Gas

-0.85

Correlation Coefficient

Allient  China Gas

Pay attention - limited upside

The 3 months correlation between Allient and China is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Allient and China Gas Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Gas Holdings and Allient 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 Allient are associated (or correlated) with China Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Gas Holdings has no effect on the direction of Allient i.e., Allient and China Gas go up and down completely randomly.

Pair Corralation between Allient and China Gas

Given the investment horizon of 90 days Allient is expected to generate 1.11 times more return on investment than China Gas. However, Allient is 1.11 times more volatile than China Gas Holdings. It trades about 0.05 of its potential returns per unit of risk. China Gas Holdings is currently generating about 0.04 per unit of risk. If you would invest  2,529  in Allient on October 25, 2024 and sell it today you would earn a total of  104.00  from holding Allient or generate 4.11% return on investment over 90 days.

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

Allient  vs.  China Gas Holdings

Allient

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Gas Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Gas Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Allient and China Gas

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

The idea behind Allient and China Gas 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.