Correlation Between Stock Exchange and Asia Plus

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

By analyzing existing cross correlation between Stock Exchange Of and Asia Plus Group, you can compare the effects of market volatilities on Stock Exchange and Asia Plus 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 Stock Exchange with a short position of Asia Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stock Exchange and Asia Plus.

Diversification Opportunities for Stock Exchange and Asia Plus

0.69

Correlation Coefficient

Stock Exchange  Asia Plus

Poor diversification

The 3 months correlation between Stock and Asia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Stock Exchange Of and Asia Plus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Plus Group and Stock Exchange 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 Stock Exchange Of are associated (or correlated) with Asia Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Plus Group has no effect on the direction of Stock Exchange i.e., Stock Exchange and Asia Plus go up and down completely randomly.

Pair Corralation between Stock Exchange and Asia Plus

Assuming the 90 days trading horizon Stock Exchange is expected to generate 1.62 times less return on investment than Asia Plus. But when comparing it to its historical volatility, Stock Exchange Of is 2.23 times less risky than Asia Plus. It trades about 0.11 of its potential returns per unit of risk. Asia Plus Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Asia Plus Group on September 4, 2024 and sell it today you would earn a total of  18.00  from holding Asia Plus Group or generate 7.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Stock Exchange Of  vs.  Asia Plus Group

Pair Trading with Stock Exchange and Asia Plus

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

The idea behind Stock Exchange Of and Asia Plus Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.