Correlation Between ALFORMER Industrial and Jentech Precision

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

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

Diversification Opportunities for ALFORMER Industrial and Jentech Precision

0.53

Correlation Coefficient

ALFORMER Industrial  Jentech Precision

Very weak diversification

The 3 months correlation between ALFORMER and Jentech is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ALFORMER Industrial Co and Jentech Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jentech Precision and ALFORMER Industrial 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 ALFORMER Industrial Co are associated (or correlated) with Jentech Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jentech Precision has no effect on the direction of ALFORMER Industrial i.e., ALFORMER Industrial and Jentech Precision go up and down completely randomly.

Pair Corralation between ALFORMER Industrial and Jentech Precision

Assuming the 90 days trading horizon ALFORMER Industrial Co is expected to generate 1.5 times more return on investment than Jentech Precision. However, ALFORMER Industrial is 1.5 times more volatile than Jentech Precision Industrial. It trades about 0.13 of its potential returns per unit of risk. Jentech Precision Industrial is currently generating about 0.05 per unit of risk. If you would invest  2,900  in ALFORMER Industrial Co on September 2, 2024 and sell it today you would earn a total of  960.00  from holding ALFORMER Industrial Co or generate 33.1% return on investment over 90 days.

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

ALFORMER Industrial Co  vs.  Jentech Precision Industrial

ALFORMER Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALFORMER Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Jentech Precision

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jentech Precision Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Jentech Precision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ALFORMER Industrial and Jentech Precision

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

The idea behind ALFORMER Industrial Co and Jentech Precision Industrial 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.