Correlation Between Remgro and Allied Electronics

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

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

Diversification Opportunities for Remgro and Allied Electronics

-0.12

Correlation Coefficient

Remgro  Allied Electronics

Good diversification

The 3 months correlation between Remgro and Allied is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Remgro and Allied Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Electronics and Remgro 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 Remgro 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 Remgro i.e., Remgro and Allied Electronics go up and down completely randomly.

Pair Corralation between Remgro and Allied Electronics

Assuming the 90 days trading horizon Remgro is expected to under-perform the Allied Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Remgro is 1.3 times less risky than Allied Electronics. The stock trades about -0.09 of its potential returns per unit of risk. The Allied Electronics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  180,100  in Allied Electronics on October 25, 2024 and sell it today you would earn a total of  40,100  from holding Allied Electronics or generate 22.27% return on investment over 90 days.

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

Remgro  vs.  Allied Electronics

Remgro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Remgro 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

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Electronics are ranked lower than 15 (%) 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 Remgro and Allied Electronics

The main advantage of trading using opposite Remgro and Allied Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Remgro 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 Remgro 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.