Correlation Between Asmedia Technology and DingZing Advanced
Can any of the company-specific risk be diversified away by investing in both Asmedia Technology and DingZing Advanced 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 Asmedia Technology and DingZing Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asmedia Technology and DingZing Advanced Materials, you can compare the effects of market volatilities on Asmedia Technology and DingZing Advanced 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 Asmedia Technology with a short position of DingZing Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asmedia Technology and DingZing Advanced.
Diversification Opportunities for Asmedia Technology and DingZing Advanced
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asmedia and DingZing is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology and DingZing Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DingZing Advanced and Asmedia 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 Asmedia Technology are associated (or correlated) with DingZing Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DingZing Advanced has no effect on the direction of Asmedia Technology i.e., Asmedia Technology and DingZing Advanced go up and down completely randomly.
Pair Corralation between Asmedia Technology and DingZing Advanced
Assuming the 90 days trading horizon Asmedia Technology is expected to generate 1.13 times less return on investment than DingZing Advanced. In addition to that, Asmedia Technology is 1.12 times more volatile than DingZing Advanced Materials. It trades about 0.07 of its total potential returns per unit of risk. DingZing Advanced Materials is currently generating about 0.08 per unit of volatility. If you would invest 5,904 in DingZing Advanced Materials on November 7, 2024 and sell it today you would earn a total of 10,696 from holding DingZing Advanced Materials or generate 181.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Asmedia Technology vs. DingZing Advanced Materials
Performance |
| Timeline |
| Asmedia Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| DingZing Advanced |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Asmedia Technology and DingZing Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asmedia Technology and DingZing Advanced
The main advantage of trading using opposite Asmedia Technology and DingZing Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asmedia Technology position performs unexpectedly, DingZing Advanced 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 DingZing Advanced will offset losses from the drop in DingZing Advanced's long position.The idea behind Asmedia Technology and DingZing Advanced Materials 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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