Correlation Between Allient and Small Cap

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

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

Diversification Opportunities for Allient and Small Cap

0.01

Correlation Coefficient

Allient  Small Cap

Significant diversification

The 3 months correlation between Allient and Small is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Allient and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Allient i.e., Allient and Small Cap go up and down completely randomly.

Pair Corralation between Allient and Small Cap

Given the investment horizon of 90 days Allient is expected to generate 7.68 times more return on investment than Small Cap. However, Allient is 7.68 times more volatile than Small Cap Premium. It trades about 0.02 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.0 per unit of risk. If you would invest  2,362  in Allient on December 19, 2024 and sell it today you would earn a total of  4.00  from holding Allient or generate 0.17% return on investment over 90 days.

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

Allient  vs.  Small Cap Premium

Allient

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Allient is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Small Cap Premium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Premium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allient and Small Cap

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

The idea behind Allient and Small Cap Premium 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.