Correlation Between Plexus Corp and Allied Motion

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

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

Diversification Opportunities for Plexus Corp and Allied Motion

0.8

Correlation Coefficient

Plexus Corp  Allied Motion

Very poor diversification

The 3 months correlation between Plexus and Allied is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Plexus Corp and Allied Motion Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Motion Techno and Plexus Corp 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 Plexus Corp are associated (or correlated) with Allied Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Motion Techno has no effect on the direction of Plexus Corp i.e., Plexus Corp and Allied Motion go up and down completely randomly.

Pair Corralation between Plexus Corp and Allied Motion

Given the investment horizon of 90 days Plexus Corp is expected to generate 0.77 times more return on investment than Allied Motion. However, Plexus Corp is 1.3 times less risky than Allied Motion. It trades about 0.05 of its potential returns per unit of risk. Allied Motion Technologies is currently generating about 0.04 per unit of risk. If you would invest  10,758  in Plexus Corp on September 2, 2024 and sell it today you would earn a total of  5,682  from holding Plexus Corp or generate 52.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	31.05%
Values	Daily Returns

Plexus Corp  vs.  Allied Motion Technologies

Plexus Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Allied Motion Techno

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Plexus Corp and Allied Motion

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

The idea behind Plexus Corp and Allied Motion Technologies 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..