Correlation Between Sanyang and Asia Metal

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

By analyzing existing cross correlation between Sanyang Motor Co and Asia Metal Industries, you can compare the effects of market volatilities on Sanyang and Asia Metal 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 Sanyang with a short position of Asia Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanyang and Asia Metal.

Diversification Opportunities for Sanyang and Asia Metal

0.07

Correlation Coefficient

Sanyang  Asia Metal

Significant diversification

The 3 months correlation between Sanyang and Asia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sanyang Motor Co and Asia Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Industries and Sanyang 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 Sanyang Motor Co are associated (or correlated) with Asia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Metal Industries has no effect on the direction of Sanyang i.e., Sanyang and Asia Metal go up and down completely randomly.

Pair Corralation between Sanyang and Asia Metal

Assuming the 90 days trading horizon Sanyang Motor Co is expected to under-perform the Asia Metal. But the stock apears to be less risky and, when comparing its historical volatility, Sanyang Motor Co is 1.65 times less risky than Asia Metal. The stock trades about -0.09 of its potential returns per unit of risk. The Asia Metal Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,440  in Asia Metal Industries on September 22, 2024 and sell it today you would earn a total of  2,240  from holding Asia Metal Industries or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Sanyang Motor Co  vs.  Asia Metal Industries

Sanyang Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sanyang Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Asia Metal Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Metal Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Asia Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sanyang and Asia Metal

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

The idea behind Sanyang Motor Co and Asia Metal Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.