Correlation Between ALi Corp and Bright Led

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

By analyzing existing cross correlation between ALi Corp and Bright Led Electronics, you can compare the effects of market volatilities on ALi Corp and Bright Led 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 ALi Corp with a short position of Bright Led. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALi Corp and Bright Led.

Diversification Opportunities for ALi Corp and Bright Led

-0.26

Correlation Coefficient

ALi Corp  Bright Led

Very good diversification

The 3 months correlation between ALi and Bright is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding ALi Corp and Bright Led Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Led Electronics and ALi Corp 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 ALi Corp are associated (or correlated) with Bright Led. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Led Electronics has no effect on the direction of ALi Corp i.e., ALi Corp and Bright Led go up and down completely randomly.

Pair Corralation between ALi Corp and Bright Led

Assuming the 90 days trading horizon ALi Corp is expected to under-perform the Bright Led. In addition to that, ALi Corp is 1.8 times more volatile than Bright Led Electronics. It trades about -0.1 of its total potential returns per unit of risk. Bright Led Electronics is currently generating about 0.08 per unit of volatility. If you would invest  1,910  in Bright Led Electronics on February 21, 2024 and sell it today you would earn a total of  295.00  from holding Bright Led Electronics or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.15%
Values	Daily Returns

ALi Corp  vs.  Bright Led Electronics

ALi Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALi Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Bright Led Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Led Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bright Led may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with ALi Corp and Bright Led

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

The idea behind ALi Corp and Bright Led Electronics 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.