Correlation Between Nano Labs and Allegro Microsystems

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

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

Diversification Opportunities for Nano Labs and Allegro Microsystems

0.01

Correlation Coefficient

Nano Labs  Allegro Microsystems

Significant diversification

The 3 months correlation between Nano and Allegro is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Nano Labs and Allegro Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegro Microsystems and Nano Labs 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 Nano Labs are associated (or correlated) with Allegro Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegro Microsystems has no effect on the direction of Nano Labs i.e., Nano Labs and Allegro Microsystems go up and down completely randomly.

Pair Corralation between Nano Labs and Allegro Microsystems

Allowing for the 90-day total investment horizon Nano Labs is expected to generate 8.17 times more return on investment than Allegro Microsystems. However, Nano Labs is 8.17 times more volatile than Allegro Microsystems. It trades about 0.15 of its potential returns per unit of risk. Allegro Microsystems is currently generating about 0.0 per unit of risk. If you would invest  296.00  in Nano Labs on September 21, 2024 and sell it today you would earn a total of  576.00  from holding Nano Labs or generate 194.59% return on investment over 90 days.

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

Nano Labs  vs.  Allegro Microsystems

Nano Labs

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nano Labs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nano Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Allegro Microsystems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegro Microsystems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Allegro Microsystems is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nano Labs and Allegro Microsystems

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

The idea behind Nano Labs and Allegro Microsystems 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 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.