Correlation Between Construction and Asia Pacific

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

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

Diversification Opportunities for Construction and Asia Pacific

-0.55

Correlation Coefficient

Construction  Asia Pacific

Excellent diversification

The 3 months correlation between Construction and Asia is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Construction And Investment and Asia Pacific Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investment and Construction 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 Construction And Investment are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investment has no effect on the direction of Construction i.e., Construction and Asia Pacific go up and down completely randomly.

Pair Corralation between Construction and Asia Pacific

Assuming the 90 days trading horizon Construction And Investment is expected to generate 0.53 times more return on investment than Asia Pacific. However, Construction And Investment is 1.88 times less risky than Asia Pacific. It trades about 0.17 of its potential returns per unit of risk. Asia Pacific Investment is currently generating about 0.01 per unit of risk. If you would invest  3,430,000  in Construction And Investment on September 13, 2024 and sell it today you would earn a total of  590,000  from holding Construction And Investment or generate 17.2% return on investment over 90 days.

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

Construction And Investment  vs.  Asia Pacific Investment

Construction And Inv

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Construction And Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Construction displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Construction and Asia Pacific

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

The idea behind Construction And Investment and Asia Pacific 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.