Correlation Between Prime Oil and CoAsia Microelectronics
Can any of the company-specific risk be diversified away by investing in both Prime Oil and CoAsia Microelectronics 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 Prime Oil and CoAsia Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Oil Chemical and CoAsia Microelectronics, you can compare the effects of market volatilities on Prime Oil and CoAsia Microelectronics 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 Prime Oil with a short position of CoAsia Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Oil and CoAsia Microelectronics.
Diversification Opportunities for Prime Oil and CoAsia Microelectronics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prime and CoAsia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prime Oil Chemical and CoAsia Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoAsia Microelectronics and Prime Oil 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 Prime Oil Chemical are associated (or correlated) with CoAsia Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoAsia Microelectronics has no effect on the direction of Prime Oil i.e., Prime Oil and CoAsia Microelectronics go up and down completely randomly.
Pair Corralation between Prime Oil and CoAsia Microelectronics
Assuming the 90 days trading horizon Prime Oil is expected to generate 19.69 times less return on investment than CoAsia Microelectronics. But when comparing it to its historical volatility, Prime Oil Chemical is 6.52 times less risky than CoAsia Microelectronics. It trades about 0.06 of its potential returns per unit of risk. CoAsia Microelectronics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,750 in CoAsia Microelectronics on November 3, 2024 and sell it today you would earn a total of 415.00 from holding CoAsia Microelectronics or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Oil Chemical vs. CoAsia Microelectronics
Performance |
| Timeline |
| Prime Oil Chemical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| CoAsia Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Prime Oil and CoAsia Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Oil and CoAsia Microelectronics
The main advantage of trading using opposite Prime Oil and CoAsia Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Oil position performs unexpectedly, CoAsia Microelectronics 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 CoAsia Microelectronics will offset losses from the drop in CoAsia Microelectronics' long position.The idea behind Prime Oil Chemical and CoAsia Microelectronics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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