Correlation Between Allied Motion and Daktronics

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

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

Diversification Opportunities for Allied Motion and Daktronics

0.67

Correlation Coefficient

Allied Motion  Daktronics

Poor diversification

The 3 months correlation between Allied and Daktronics is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Allied Motion Technologies and Daktronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daktronics and Allied Motion 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 Motion Technologies are associated (or correlated) with Daktronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daktronics has no effect on the direction of Allied Motion i.e., Allied Motion and Daktronics go up and down completely randomly.

Pair Corralation between Allied Motion and Daktronics

If you would invest  1,361  in Daktronics on September 3, 2024 and sell it today you would earn a total of  179.00  from holding Daktronics or generate 13.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Allied Motion Technologies  vs.  Daktronics

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.

Daktronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daktronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Daktronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allied Motion and Daktronics

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

The idea behind Allied Motion Technologies and Daktronics 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 Anywhere module to track or share privately all of your investments from the convenience of any device.