Correlation Between Prime Office and Asian Sea

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

By analyzing existing cross correlation between Prime Office Leasehold and Asian Sea, you can compare the effects of market volatilities on Prime Office and Asian Sea 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 Prime Office with a short position of Asian Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Office and Asian Sea.

Diversification Opportunities for Prime Office and Asian Sea

-0.5

Correlation Coefficient

Prime Office  Asian Sea

Very good diversification

The 3 months correlation between Prime and Asian is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Prime Office Leasehold and Asian Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Sea and Prime Office 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 Prime Office Leasehold are associated (or correlated) with Asian Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Sea has no effect on the direction of Prime Office i.e., Prime Office and Asian Sea go up and down completely randomly.

Pair Corralation between Prime Office and Asian Sea

Assuming the 90 days trading horizon Prime Office Leasehold is expected to generate 0.53 times more return on investment than Asian Sea. However, Prime Office Leasehold is 1.88 times less risky than Asian Sea. It trades about 0.1 of its potential returns per unit of risk. Asian Sea is currently generating about -0.03 per unit of risk. If you would invest  588.00  in Prime Office Leasehold on September 13, 2024 and sell it today you would earn a total of  37.00  from holding Prime Office Leasehold or generate 6.29% return on investment over 90 days.

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

Prime Office Leasehold  vs.  Asian Sea

Prime Office Leasehold

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Office Leasehold are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. Despite quite weak forward-looking signals, Prime Office may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Asian Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Asian Sea is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prime Office and Asian Sea

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

The idea behind Prime Office Leasehold and Asian Sea 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.