Correlation Between Alps Electric and Allied Motion

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

By analyzing existing cross correlation between Alps Electric Co and Allied Motion Technologies, you can compare the effects of market volatilities on Alps Electric and Allied Motion 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 Alps Electric with a short position of Allied Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alps Electric and Allied Motion.

Diversification Opportunities for Alps Electric and Allied Motion

-0.71

Correlation Coefficient

Alps Electric  Allied Motion

Pay attention - limited upside

The 3 months correlation between Alps and Allied is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alps Electric Co and Allied Motion Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Motion Techno and Alps Electric 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 Alps Electric Co are associated (or correlated) with Allied Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Motion Techno has no effect on the direction of Alps Electric i.e., Alps Electric and Allied Motion go up and down completely randomly.

Pair Corralation between Alps Electric and Allied Motion

If you would invest  3,917  in Allied Motion Technologies on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Allied Motion Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Alps Electric Co  vs.  Allied Motion Technologies

Alps Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alps Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Alps Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Allied Motion Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Motion Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alps Electric and Allied Motion

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

The idea behind Alps Electric Co and Allied Motion Technologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.