Correlation Between Proto Labs and Allegheny Technologies

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

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

Diversification Opportunities for Proto Labs and Allegheny Technologies

-0.63

Correlation Coefficient

Proto Labs  Allegheny Technologies

Excellent diversification

The 3 months correlation between Proto and Allegheny is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Proto Labs and Allegheny Technologies Incorpo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allegheny Technologies and Proto 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 Proto Labs are associated (or correlated) with Allegheny Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allegheny Technologies has no effect on the direction of Proto Labs i.e., Proto Labs and Allegheny Technologies go up and down completely randomly.

Pair Corralation between Proto Labs and Allegheny Technologies

Given the investment horizon of 90 days Proto Labs is expected to generate 1.62 times more return on investment than Allegheny Technologies. However, Proto Labs is 1.62 times more volatile than Allegheny Technologies Incorporated. It trades about 0.36 of its potential returns per unit of risk. Allegheny Technologies Incorporated is currently generating about -0.09 per unit of risk. If you would invest  3,727  in Proto Labs on September 19, 2024 and sell it today you would earn a total of  668.50  from holding Proto Labs or generate 17.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Proto Labs  vs.  Allegheny Technologies Incorpo

Proto Labs

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Proto Labs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Proto Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

Allegheny Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegheny Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Proto Labs and Allegheny Technologies

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

The idea behind Proto Labs and Allegheny Technologies Incorporated 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.