Correlation Between Allegro Biodiesel and American Buildings

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

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

Diversification Opportunities for Allegro Biodiesel and American Buildings

0.0

Correlation Coefficient

Allegro Biodiesel  American Buildings

Pay attention - limited upside

The 3 months correlation between Allegro and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Allegro Biodiesel Corp and American Buildings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Buildings and Allegro Biodiesel 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 Allegro Biodiesel Corp are associated (or correlated) with American Buildings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Buildings has no effect on the direction of Allegro Biodiesel i.e., Allegro Biodiesel and American Buildings go up and down completely randomly.

Pair Corralation between Allegro Biodiesel and American Buildings

If you would invest (100.00) in American Buildings Co on January 26, 2024 and sell it today you would earn a total of  100.00  from holding American Buildings Co or generate -100.0% return on investment over 90 days.

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

Allegro Biodiesel Corp  vs.  American Buildings Co

Allegro Biodiesel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allegro Biodiesel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Allegro Biodiesel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

American Buildings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Buildings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American Buildings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allegro Biodiesel and American Buildings

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

The idea behind Allegro Biodiesel Corp and American Buildings Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.