Correlation Between U Tech and Asia Optical
Can any of the company-specific risk be diversified away by investing in both U Tech and Asia Optical 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 U Tech and Asia Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Tech Media Corp and Asia Optical Co, you can compare the effects of market volatilities on U Tech and Asia Optical 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 U Tech with a short position of Asia Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Tech and Asia Optical.
Diversification Opportunities for U Tech and Asia Optical
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 3050 and Asia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding U Tech Media Corp and Asia Optical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Optical and U Tech 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 U Tech Media Corp are associated (or correlated) with Asia Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Optical has no effect on the direction of U Tech i.e., U Tech and Asia Optical go up and down completely randomly.
Pair Corralation between U Tech and Asia Optical
Assuming the 90 days trading horizon U Tech is expected to generate 11.56 times less return on investment than Asia Optical. But when comparing it to its historical volatility, U Tech Media Corp is 1.03 times less risky than Asia Optical. It trades about 0.01 of its potential returns per unit of risk. Asia Optical Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,530 in Asia Optical Co on November 8, 2024 and sell it today you would earn a total of 11,070 from holding Asia Optical Co or generate 169.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
U Tech Media Corp vs. Asia Optical Co
Performance |
| Timeline |
| U Tech Media |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Asia Optical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
U Tech and Asia Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Tech and Asia Optical
The main advantage of trading using opposite U Tech and Asia Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Tech position performs unexpectedly, Asia Optical 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 Optical will offset losses from the drop in Asia Optical's long position.The idea behind U Tech Media Corp and Asia Optical Co 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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