Correlation Between SCG Construction and Asia Commercial

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

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

Diversification Opportunities for SCG Construction and Asia Commercial

0.08

Correlation Coefficient

SCG Construction  Asia Commercial

Significant diversification

The 3 months correlation between SCG and Asia is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SCG Construction JSC and Asia Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Commercial Bank and SCG 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 SCG Construction JSC are associated (or correlated) with Asia Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Commercial Bank has no effect on the direction of SCG Construction i.e., SCG Construction and Asia Commercial go up and down completely randomly.

Pair Corralation between SCG Construction and Asia Commercial

Assuming the 90 days trading horizon SCG Construction is expected to generate 194.33 times less return on investment than Asia Commercial. But when comparing it to its historical volatility, SCG Construction JSC is 2.61 times less risky than Asia Commercial. It trades about 0.0 of its potential returns per unit of risk. Asia Commercial Bank is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,533,013  in Asia Commercial Bank on September 14, 2024 and sell it today you would earn a total of  996,987  from holding Asia Commercial Bank or generate 65.03% return on investment over 90 days.

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

SCG Construction JSC  vs.  Asia Commercial Bank

SCG Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCG Construction JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, SCG Construction is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Asia Commercial Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Commercial Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Asia Commercial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SCG Construction and Asia Commercial

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

The idea behind SCG Construction JSC and Asia Commercial Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.