Correlation Between Allied Blenders and Shipping

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

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

Diversification Opportunities for Allied Blenders and Shipping

0.65

Correlation Coefficient

Allied Blenders  Shipping

Poor diversification

The 3 months correlation between Allied and Shipping is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Allied Blenders Distillers and Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shipping and Allied Blenders 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 Allied Blenders Distillers are associated (or correlated) with Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shipping has no effect on the direction of Allied Blenders i.e., Allied Blenders and Shipping go up and down completely randomly.

Pair Corralation between Allied Blenders and Shipping

Assuming the 90 days trading horizon Allied Blenders Distillers is expected to generate 0.9 times more return on investment than Shipping. However, Allied Blenders Distillers is 1.12 times less risky than Shipping. It trades about 0.05 of its potential returns per unit of risk. Shipping is currently generating about -0.01 per unit of risk. If you would invest  35,415  in Allied Blenders Distillers on September 13, 2024 and sell it today you would earn a total of  1,975  from holding Allied Blenders Distillers or generate 5.58% return on investment over 90 days.

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

Allied Blenders Distillers  vs.  Shipping

Allied Blenders Dist

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Blenders Distillers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Allied Blenders may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Shipping is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allied Blenders and Shipping

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

The idea behind Allied Blenders Distillers and Shipping 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..