Correlation Between Asia Commercial and Development Investment

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

By analyzing existing cross correlation between Asia Commercial Bank and Development Investment Construction, you can compare the effects of market volatilities on Asia Commercial and Development Investment 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 Commercial with a short position of Development Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Commercial and Development Investment.

Diversification Opportunities for Asia Commercial and Development Investment

-0.11

Correlation Coefficient

Asia Commercial  Development Investment

Good diversification

The 3 months correlation between Asia and Development is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Asia Commercial Bank and Development Investment Constru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Investment and Asia Commercial 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 Commercial Bank are associated (or correlated) with Development Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Investment has no effect on the direction of Asia Commercial i.e., Asia Commercial and Development Investment go up and down completely randomly.

Pair Corralation between Asia Commercial and Development Investment

Assuming the 90 days trading horizon Asia Commercial Bank is expected to generate 0.41 times more return on investment than Development Investment. However, Asia Commercial Bank is 2.42 times less risky than Development Investment. It trades about -0.02 of its potential returns per unit of risk. Development Investment Construction is currently generating about -0.01 per unit of risk. If you would invest  2,415,000  in Asia Commercial Bank on September 15, 2024 and sell it today you would lose (60,000) from holding Asia Commercial Bank or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.38%
Values	Daily Returns

Asia Commercial Bank  vs.  Development Investment Constru

Asia Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Asia Commercial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Development Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Development Investment Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Development Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Asia Commercial and Development Investment

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

The idea behind Asia Commercial Bank and Development Investment Construction 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.