Correlation Between Astoria Investments and Allied Electronics

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

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

Diversification Opportunities for Astoria Investments and Allied Electronics

0.53

Correlation Coefficient

Astoria Investments  Allied Electronics

Very weak diversification

The 3 months correlation between Astoria and Allied is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Astoria Investments and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and Astoria Investments 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 Astoria Investments are associated (or correlated) with Allied Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Electronics has no effect on the direction of Astoria Investments i.e., Astoria Investments and Allied Electronics go up and down completely randomly.

Pair Corralation between Astoria Investments and Allied Electronics

Assuming the 90 days trading horizon Astoria Investments is expected to generate 0.98 times more return on investment than Allied Electronics. However, Astoria Investments is 1.02 times less risky than Allied Electronics. It trades about -0.05 of its potential returns per unit of risk. Allied Electronics is currently generating about -0.05 per unit of risk. If you would invest  85,000  in Astoria Investments on December 24, 2024 and sell it today you would lose (5,000) from holding Astoria Investments or give up 5.88% of portfolio value over 90 days.

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

Astoria Investments  vs.  Allied Electronics

Astoria Investments

Risk-Adjusted Performance

Very Weak

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

Allied Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Astoria Investments and Allied Electronics

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

The idea behind Astoria Investments and Allied 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.