Correlation Between Nampak and Allied Electronics

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

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

Diversification Opportunities for Nampak and Allied Electronics

-0.51

Correlation Coefficient

Nampak  Allied Electronics

Excellent diversification

The 3 months correlation between Nampak and Allied is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nampak and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and Nampak 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 Nampak 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 Nampak i.e., Nampak and Allied Electronics go up and down completely randomly.

Pair Corralation between Nampak and Allied Electronics

Assuming the 90 days trading horizon Nampak is expected to under-perform the Allied Electronics. In addition to that, Nampak is 1.44 times more volatile than Allied Electronics. It trades about -0.05 of its total potential returns per unit of risk. Allied Electronics is currently generating about 0.27 per unit of volatility. If you would invest  182,700  in Allied Electronics on October 13, 2024 and sell it today you would earn a total of  61,200  from holding Allied Electronics or generate 33.5% return on investment over 90 days.

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

Nampak  vs.  Allied Electronics

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak 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.

Allied Electronics

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Electronics are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Allied Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nampak and Allied Electronics

The main advantage of trading using opposite Nampak and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nampak 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 Nampak 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.