Correlation Between Alliance Select and Integrated Micro

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

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

Diversification Opportunities for Alliance Select and Integrated Micro

0.59

Correlation Coefficient

Alliance Select  Integrated Micro

Very weak diversification

The 3 months correlation between Alliance and Integrated is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and Integrated Micro Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Micro Ele and Alliance Select 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 Alliance Select Foods are associated (or correlated) with Integrated Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Micro Ele has no effect on the direction of Alliance Select i.e., Alliance Select and Integrated Micro go up and down completely randomly.

Pair Corralation between Alliance Select and Integrated Micro

Assuming the 90 days trading horizon Alliance Select Foods is expected to generate 1.53 times more return on investment than Integrated Micro. However, Alliance Select is 1.53 times more volatile than Integrated Micro Electronics. It trades about -0.02 of its potential returns per unit of risk. Integrated Micro Electronics is currently generating about -0.08 per unit of risk. If you would invest  55.00  in Alliance Select Foods on September 19, 2024 and sell it today you would lose (18.00) from holding Alliance Select Foods or give up 32.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.79%
Values	Daily Returns

Alliance Select Foods  vs.  Integrated Micro Electronics

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Integrated Micro Ele

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Micro 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 Alliance Select and Integrated Micro

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

The idea behind Alliance Select Foods and Integrated Micro 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..