Correlation Between FNB ETN and Allied Electronics

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

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

Diversification Opportunities for FNB ETN and Allied Electronics

-0.09

Correlation Coefficient

FNB ETN  Allied Electronics

Good diversification

The 3 months correlation between FNB and Allied is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FNB ETN JPMORGQ and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and FNB ETN 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 FNB ETN JPMORGQ 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 FNB ETN i.e., FNB ETN and Allied Electronics go up and down completely randomly.

Pair Corralation between FNB ETN and Allied Electronics

Assuming the 90 days trading horizon FNB ETN JPMORGQ is expected to generate 1.22 times more return on investment than Allied Electronics. However, FNB ETN is 1.22 times more volatile than Allied Electronics. It trades about 0.0 of its potential returns per unit of risk. Allied Electronics is currently generating about -0.05 per unit of risk. If you would invest  256,200  in FNB ETN JPMORGQ on December 24, 2024 and sell it today you would lose (1,500) from holding FNB ETN JPMORGQ or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.66%
Values	Daily Returns

FNB ETN JPMORGQ  vs.  Allied Electronics

FNB ETN JPMORGQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days FNB ETN JPMORGQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FNB ETN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 FNB ETN and Allied Electronics

The main advantage of trading using opposite FNB ETN and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FNB ETN 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 FNB ETN JPMORGQ 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.