Correlation Between Crown Asia and STI Education

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

By analyzing existing cross correlation between Crown Asia Chemicals and STI Education Systems, you can compare the effects of market volatilities on Crown Asia and STI Education 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 Crown Asia with a short position of STI Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Asia and STI Education.

Diversification Opportunities for Crown Asia and STI Education

0.07

Correlation Coefficient

Crown Asia  STI Education

Significant diversification

The 3 months correlation between Crown and STI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Crown Asia Chemicals and STI Education Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STI Education Systems and Crown Asia 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 Crown Asia Chemicals are associated (or correlated) with STI Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STI Education Systems has no effect on the direction of Crown Asia i.e., Crown Asia and STI Education go up and down completely randomly.

Pair Corralation between Crown Asia and STI Education

Assuming the 90 days trading horizon Crown Asia is expected to generate 10.93 times less return on investment than STI Education. But when comparing it to its historical volatility, Crown Asia Chemicals is 1.43 times less risky than STI Education. It trades about 0.01 of its potential returns per unit of risk. STI Education Systems is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  116.00  in STI Education Systems on September 5, 2024 and sell it today you would earn a total of  6.00  from holding STI Education Systems or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Crown Asia Chemicals  vs.  STI Education Systems

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crown Asia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

STI Education Systems

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, STI Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crown Asia and STI Education

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

The idea behind Crown Asia Chemicals and STI Education Systems 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.