Correlation Between Asia Cement and Universal Cement
Can any of the company-specific risk be diversified away by investing in both Asia Cement and Universal Cement 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 Asia Cement and Universal Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Cement Corp and Universal Cement Corp, you can compare the effects of market volatilities on Asia Cement and Universal Cement 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 Asia Cement with a short position of Universal Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Cement and Universal Cement.
Diversification Opportunities for Asia Cement and Universal Cement
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asia and Universal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Asia Cement Corp and Universal Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Cement Corp and Asia Cement 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 Asia Cement Corp are associated (or correlated) with Universal Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Cement Corp has no effect on the direction of Asia Cement i.e., Asia Cement and Universal Cement go up and down completely randomly.
Pair Corralation between Asia Cement and Universal Cement
Assuming the 90 days trading horizon Asia Cement Corp is expected to generate 0.82 times more return on investment than Universal Cement. However, Asia Cement Corp is 1.22 times less risky than Universal Cement. It trades about 0.01 of its potential returns per unit of risk. Universal Cement Corp is currently generating about -0.07 per unit of risk. If you would invest 4,160 in Asia Cement Corp on September 1, 2024 and sell it today you would earn a total of 45.00 from holding Asia Cement Corp or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Asia Cement Corp vs. Universal Cement Corp
Performance |
| Timeline |
| Asia Cement Corp |
| Universal Cement Corp |
Asia Cement and Universal Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia Cement and Universal Cement
The main advantage of trading using opposite Asia Cement and Universal Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Cement position performs unexpectedly, Universal Cement 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 Universal Cement will offset losses from the drop in Universal Cement's long position.| Asia Cement vs. Taiwan Cement Corp | Asia Cement vs. Far Eastern New | Asia Cement vs. Uni President Enterprises Corp | Asia Cement vs. Nan Ya Plastics |
| Universal Cement vs. Chia Hsin Cement | Universal Cement vs. Hsing Ta Cement | Universal Cement vs. USI Corp | Universal Cement vs. Asia Polymer Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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