Correlation Between Asia Plus and Eastern Commercial

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

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

Diversification Opportunities for Asia Plus and Eastern Commercial

-0.33

Correlation Coefficient

Asia Plus  Eastern Commercial

Very good diversification

The 3 months correlation between Asia and Eastern is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Asia Plus Group and Eastern Commercial Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Commercial and Asia Plus 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 Plus Group are associated (or correlated) with Eastern Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Commercial has no effect on the direction of Asia Plus i.e., Asia Plus and Eastern Commercial go up and down completely randomly.

Pair Corralation between Asia Plus and Eastern Commercial

Assuming the 90 days trading horizon Asia Plus Group is expected to under-perform the Eastern Commercial. But the stock apears to be less risky and, when comparing its historical volatility, Asia Plus Group is 3.43 times less risky than Eastern Commercial. The stock trades about -0.09 of its potential returns per unit of risk. The Eastern Commercial Leasing is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Eastern Commercial Leasing on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Eastern Commercial Leasing or generate 0.0% return on investment over 90 days.

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

Asia Plus Group  vs.  Eastern Commercial Leasing

Asia Plus Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Plus Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Asia Plus is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eastern Commercial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Commercial Leasing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Eastern Commercial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Asia Plus and Eastern Commercial

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

The idea behind Asia Plus Group and Eastern Commercial Leasing 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.