Correlation Between Arbor Technology and New Asia
Can any of the company-specific risk be diversified away by investing in both Arbor Technology and New Asia 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 Arbor Technology and New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arbor Technology and New Asia Construction, you can compare the effects of market volatilities on Arbor Technology and New Asia 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 Arbor Technology with a short position of New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Technology and New Asia.
Diversification Opportunities for Arbor Technology and New Asia
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arbor and New is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Technology and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and Arbor Technology 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 Arbor Technology are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Arbor Technology i.e., Arbor Technology and New Asia go up and down completely randomly.
Pair Corralation between Arbor Technology and New Asia
Assuming the 90 days trading horizon Arbor Technology is expected to under-perform the New Asia. But the stock apears to be less risky and, when comparing its historical volatility, Arbor Technology is 2.36 times less risky than New Asia. The stock trades about -0.37 of its potential returns per unit of risk. The New Asia Construction is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,420 in New Asia Construction on November 4, 2024 and sell it today you would earn a total of 290.00 from holding New Asia Construction or generate 20.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arbor Technology vs. New Asia Construction
Performance |
| Timeline |
| Arbor Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| New Asia Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Arbor Technology and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbor Technology and New Asia
The main advantage of trading using opposite Arbor Technology and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Technology position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.The idea behind Arbor Technology and New Asia Construction 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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