Correlation Between Asia Electronic and Yageo Corp
Can any of the company-specific risk be diversified away by investing in both Asia Electronic and Yageo Corp 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 Electronic and Yageo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Electronic Material and Yageo Corp, you can compare the effects of market volatilities on Asia Electronic and Yageo Corp 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 Electronic with a short position of Yageo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Electronic and Yageo Corp.
Diversification Opportunities for Asia Electronic and Yageo Corp
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Asia and Yageo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Asia Electronic Material and Yageo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yageo Corp and Asia Electronic 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 Electronic Material are associated (or correlated) with Yageo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yageo Corp has no effect on the direction of Asia Electronic i.e., Asia Electronic and Yageo Corp go up and down completely randomly.
Pair Corralation between Asia Electronic and Yageo Corp
Assuming the 90 days trading horizon Asia Electronic Material is expected to under-perform the Yageo Corp. But the stock apears to be less risky and, when comparing its historical volatility, Asia Electronic Material is 1.06 times less risky than Yageo Corp. The stock trades about -0.02 of its potential returns per unit of risk. The Yageo Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 55,100 in Yageo Corp on November 3, 2024 and sell it today you would lose (1,400) from holding Yageo Corp or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asia Electronic Material vs. Yageo Corp
Performance |
| Timeline |
| Asia Electronic Material |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Yageo Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Asia Electronic and Yageo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia Electronic and Yageo Corp
The main advantage of trading using opposite Asia Electronic and Yageo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Electronic position performs unexpectedly, Yageo Corp 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 Yageo Corp will offset losses from the drop in Yageo Corp's long position.The idea behind Asia Electronic Material and Yageo Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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