Correlation Between New Asia and Trade Van
Can any of the company-specific risk be diversified away by investing in both New Asia and Trade Van 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 New Asia and Trade Van into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Asia Construction and Trade Van Information Services, you can compare the effects of market volatilities on New Asia and Trade Van 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 New Asia with a short position of Trade Van. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Asia and Trade Van.
Diversification Opportunities for New Asia and Trade Van
Very poor diversification
The 3 months correlation between New and Trade is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding New Asia Construction and Trade Van Information Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trade Van Information and New Asia 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 New Asia Construction are associated (or correlated) with Trade Van. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trade Van Information has no effect on the direction of New Asia i.e., New Asia and Trade Van go up and down completely randomly.
Pair Corralation between New Asia and Trade Van
Assuming the 90 days trading horizon New Asia Construction is expected to generate 1.48 times more return on investment than Trade Van. However, New Asia is 1.48 times more volatile than Trade Van Information Services. It trades about 0.2 of its potential returns per unit of risk. Trade Van Information Services is currently generating about 0.04 per unit of risk. If you would invest 1,250 in New Asia Construction on September 2, 2024 and sell it today you would earn a total of 85.00 from holding New Asia Construction or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Asia Construction vs. Trade Van Information Services
Performance |
| Timeline |
| New Asia Construction |
| Trade Van Information |
New Asia and Trade Van Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Asia and Trade Van
The main advantage of trading using opposite New Asia and Trade Van positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Asia position performs unexpectedly, Trade Van 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 Trade Van will offset losses from the drop in Trade Van's long position.| New Asia vs. BES Engineering Co | New Asia vs. Delpha Construction Co | New Asia vs. Cathay Real Estate | New Asia vs. Da Cin Construction Co |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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