Correlation Between Alpha En and Interlink Electronics

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

By analyzing existing cross correlation between alpha En and Interlink Electronics, you can compare the effects of market volatilities on Alpha En and Interlink Electronics 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 Alpha En with a short position of Interlink Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha En and Interlink Electronics.

Diversification Opportunities for Alpha En and Interlink Electronics

-0.44

Correlation Coefficient

Alpha En  Interlink Electronics

Very good diversification

The 3 months correlation between Alpha and Interlink is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding alpha En and Interlink Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interlink Electronics and Alpha En 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 alpha En are associated (or correlated) with Interlink Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interlink Electronics has no effect on the direction of Alpha En i.e., Alpha En and Interlink Electronics go up and down completely randomly.

Pair Corralation between Alpha En and Interlink Electronics

Given the investment horizon of 90 days alpha En is expected to generate 1.89 times more return on investment than Interlink Electronics. However, Alpha En is 1.89 times more volatile than Interlink Electronics. It trades about 0.13 of its potential returns per unit of risk. Interlink Electronics is currently generating about 0.04 per unit of risk. If you would invest  0.01  in alpha En on December 28, 2024 and sell it today you would earn a total of  0.01  from holding alpha En or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

alpha En  vs.  Interlink Electronics

alpha En

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in alpha En are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Alpha En exhibited solid returns over the last few months and may actually be approaching a breakup point.

Interlink Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Interlink Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Interlink Electronics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha En and Interlink Electronics

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

The idea behind alpha En and Interlink Electronics 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.