Correlation Between Crown Asia and Alliance Select

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

By analyzing existing cross correlation between Crown Asia Chemicals and Alliance Select Foods, you can compare the effects of market volatilities on Crown Asia and Alliance Select 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 Crown Asia with a short position of Alliance Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Asia and Alliance Select.

Diversification Opportunities for Crown Asia and Alliance Select

0.65

Correlation Coefficient

Crown Asia  Alliance Select

Poor diversification

The 3 months correlation between Crown and Alliance is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Crown Asia Chemicals and Alliance Select Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Select Foods and Crown Asia 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 Crown Asia Chemicals are associated (or correlated) with Alliance Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Select Foods has no effect on the direction of Crown Asia i.e., Crown Asia and Alliance Select go up and down completely randomly.

Pair Corralation between Crown Asia and Alliance Select

Assuming the 90 days trading horizon Crown Asia Chemicals is expected to under-perform the Alliance Select. But the stock apears to be less risky and, when comparing its historical volatility, Crown Asia Chemicals is 2.04 times less risky than Alliance Select. The stock trades about -0.06 of its potential returns per unit of risk. The Alliance Select Foods is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  39.00  in Alliance Select Foods on October 26, 2024 and sell it today you would lose (2.00) from holding Alliance Select Foods or give up 5.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	49.12%
Values	Daily Returns

Crown Asia Chemicals  vs.  Alliance Select Foods

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Crown Asia and Alliance Select

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

The idea behind Crown Asia Chemicals and Alliance Select Foods 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.