Correlation Between ASIA Capital and Asia Biomass

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

By analyzing existing cross correlation between ASIA Capital Group and Asia Biomass Public, you can compare the effects of market volatilities on ASIA Capital and Asia Biomass 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 Capital with a short position of Asia Biomass. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASIA Capital and Asia Biomass.

Diversification Opportunities for ASIA Capital and Asia Biomass

-0.01

Correlation Coefficient

ASIA Capital  Asia Biomass

Good diversification

The 3 months correlation between ASIA and Asia is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding ASIA Capital Group and Asia Biomass Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Biomass Public and ASIA Capital 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 Capital Group are associated (or correlated) with Asia Biomass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Biomass Public has no effect on the direction of ASIA Capital i.e., ASIA Capital and Asia Biomass go up and down completely randomly.

Pair Corralation between ASIA Capital and Asia Biomass

Assuming the 90 days trading horizon ASIA Capital Group is expected to under-perform the Asia Biomass. In addition to that, ASIA Capital is 8.57 times more volatile than Asia Biomass Public. It trades about -0.22 of its total potential returns per unit of risk. Asia Biomass Public is currently generating about -0.27 per unit of volatility. If you would invest  129.00  in Asia Biomass Public on September 27, 2024 and sell it today you would lose (18.00) from holding Asia Biomass Public or give up 13.95% of portfolio value over 90 days.

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

ASIA Capital Group  vs.  Asia Biomass Public

ASIA Capital Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASIA Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ASIA Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Asia Biomass Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Biomass Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with ASIA Capital and Asia Biomass

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

The idea behind ASIA Capital Group and Asia Biomass Public 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.