Correlation Between PowerFleet and Allot Communications

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

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

Diversification Opportunities for PowerFleet and Allot Communications

0.69

Correlation Coefficient

PowerFleet  Allot Communications

Poor diversification

The 3 months correlation between PowerFleet and Allot is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PowerFleet and Allot Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allot Communications and PowerFleet 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 PowerFleet are associated (or correlated) with Allot Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allot Communications has no effect on the direction of PowerFleet i.e., PowerFleet and Allot Communications go up and down completely randomly.

Pair Corralation between PowerFleet and Allot Communications

Assuming the 90 days trading horizon PowerFleet is expected to under-perform the Allot Communications. In addition to that, PowerFleet is 1.58 times more volatile than Allot Communications. It trades about -0.18 of its total potential returns per unit of risk. Allot Communications is currently generating about -0.04 per unit of volatility. If you would invest  81,250  in Allot Communications on January 30, 2024 and sell it today you would lose (1,850) from holding Allot Communications or give up 2.28% of portfolio value over 90 days.

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

PowerFleet  vs.  Allot Communications

PowerFleet

Risk-Adjusted Performance

9 of 100

OK

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

Allot Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allot Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allot Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PowerFleet and Allot Communications

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

The idea behind PowerFleet and Allot Communications 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..