Correlation Between Investment and Central Asia

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

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

Diversification Opportunities for Investment and Central Asia

-0.14

Correlation Coefficient

Investment  Central Asia

Good diversification

The 3 months correlation between Investment and Central is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding The Investment and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals and Investment 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 The Investment are associated (or correlated) with Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Investment i.e., Investment and Central Asia go up and down completely randomly.

Pair Corralation between Investment and Central Asia

Assuming the 90 days trading horizon The Investment is expected to generate 0.34 times more return on investment than Central Asia. However, The Investment is 2.93 times less risky than Central Asia. It trades about 0.08 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.02 per unit of risk. If you would invest  36,600  in The Investment on September 4, 2024 and sell it today you would earn a total of  1,000.00  from holding The Investment or generate 2.73% return on investment over 90 days.

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

The Investment  vs.  Central Asia Metals

Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Investment and Central Asia

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

The idea behind The Investment and Central Asia Metals 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.