Correlation Between Asia Pacific and Thanh Dat

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

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

Diversification Opportunities for Asia Pacific and Thanh Dat

-0.28

Correlation Coefficient

Asia Pacific  Thanh Dat

Very good diversification

The 3 months correlation between Asia and Thanh is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Asia Pacific Investment and Thanh Dat Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thanh Dat Investment and Asia Pacific 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 Pacific Investment are associated (or correlated) with Thanh Dat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thanh Dat Investment has no effect on the direction of Asia Pacific i.e., Asia Pacific and Thanh Dat go up and down completely randomly.

Pair Corralation between Asia Pacific and Thanh Dat

Assuming the 90 days trading horizon Asia Pacific Investment is expected to generate 1.47 times more return on investment than Thanh Dat. However, Asia Pacific is 1.47 times more volatile than Thanh Dat Investment. It trades about 0.18 of its potential returns per unit of risk. Thanh Dat Investment is currently generating about -0.02 per unit of risk. If you would invest  700,000  in Asia Pacific Investment on September 15, 2024 and sell it today you would earn a total of  80,000  from holding Asia Pacific Investment or generate 11.43% return on investment over 90 days.

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

Asia Pacific Investment  vs.  Thanh Dat Investment

Asia Pacific Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thanh Dat Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thanh Dat Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thanh Dat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Asia Pacific and Thanh Dat

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

The idea behind Asia Pacific Investment and Thanh Dat Investment 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.