Correlation Between Asia Optical and Walton Advanced

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

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

Diversification Opportunities for Asia Optical and Walton Advanced

-0.53

Correlation Coefficient

Asia Optical  Walton Advanced

Excellent diversification

The 3 months correlation between Asia and Walton is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and Walton Advanced Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walton Advanced Engi and Asia Optical 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 Asia Optical Co are associated (or correlated) with Walton Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walton Advanced Engi has no effect on the direction of Asia Optical i.e., Asia Optical and Walton Advanced go up and down completely randomly.

Pair Corralation between Asia Optical and Walton Advanced

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 2.15 times more return on investment than Walton Advanced. However, Asia Optical is 2.15 times more volatile than Walton Advanced Engineering. It trades about 0.14 of its potential returns per unit of risk. Walton Advanced Engineering is currently generating about -0.18 per unit of risk. If you would invest  12,400  in Asia Optical Co on September 22, 2024 and sell it today you would earn a total of  3,950  from holding Asia Optical Co or generate 31.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Asia Optical Co  vs.  Walton Advanced Engineering

Asia Optical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Optical Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asia Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Walton Advanced Engi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walton Advanced Engineering 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Asia Optical and Walton Advanced

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

The idea behind Asia Optical Co and Walton Advanced Engineering 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.