Correlation Between Eureka Design and Asia Green

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

By analyzing existing cross correlation between Eureka Design Public and Asia Green Energy, you can compare the effects of market volatilities on Eureka Design and Asia Green 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 Eureka Design with a short position of Asia Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eureka Design and Asia Green.

Diversification Opportunities for Eureka Design and Asia Green

-0.05

Correlation Coefficient

Eureka Design  Asia Green

Good diversification

The 3 months correlation between Eureka and Asia is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Eureka Design Public and Asia Green Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Green Energy and Eureka Design 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 Eureka Design Public are associated (or correlated) with Asia Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Green Energy has no effect on the direction of Eureka Design i.e., Eureka Design and Asia Green go up and down completely randomly.

Pair Corralation between Eureka Design and Asia Green

Assuming the 90 days trading horizon Eureka Design is expected to generate 18.04 times less return on investment than Asia Green. But when comparing it to its historical volatility, Eureka Design Public is 17.41 times less risky than Asia Green. It trades about 0.05 of its potential returns per unit of risk. Asia Green Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Asia Green Energy on September 14, 2024 and sell it today you would lose (53.00) from holding Asia Green Energy or give up 29.12% of portfolio value over 90 days.

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

Eureka Design Public  vs.  Asia Green Energy

Eureka Design Public

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Design Public are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Eureka Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Asia Green Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Green Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Eureka Design and Asia Green

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

The idea behind Eureka Design Public and Asia Green Energy 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.