Correlation Between Allient and Investec

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

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

Diversification Opportunities for Allient and Investec

0.27

Correlation Coefficient

Allient  Investec

Modest diversification

The 3 months correlation between Allient and Investec is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Allient and Investec Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Group 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Group has no effect on the direction of Allient i.e., Allient and Investec go up and down completely randomly.

Pair Corralation between Allient and Investec

Given the investment horizon of 90 days Allient is expected to generate 5.57 times more return on investment than Investec. However, Allient is 5.57 times more volatile than Investec Group. It trades about 0.12 of its potential returns per unit of risk. Investec Group is currently generating about 0.12 per unit of risk. If you would invest  1,938  in Allient on September 24, 2024 and sell it today you would earn a total of  423.00  from holding Allient or generate 21.83% return on investment over 90 days.

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

Allient  vs.  Investec Group

Allient

Risk-Adjusted Performance

9 of 100

OK

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

Investec Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Investec is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allient and Investec

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

The idea behind Allient and Investec Group 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.