Correlation Between Asia Metal and Microelectronics
Can any of the company-specific risk be diversified away by investing in both Asia Metal and 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 Asia Metal and Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Metal Industries and Microelectronics Technology, you can compare the effects of market volatilities on Asia Metal and 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 Asia Metal with a short position of Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Metal and Microelectronics.
Diversification Opportunities for Asia Metal and Microelectronics
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Asia and Microelectronics is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Industries and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and Asia Metal 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 Metal Industries are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of Asia Metal i.e., Asia Metal and Microelectronics go up and down completely randomly.
Pair Corralation between Asia Metal and Microelectronics
Assuming the 90 days trading horizon Asia Metal Industries is expected to generate 0.74 times more return on investment than Microelectronics. However, Asia Metal Industries is 1.35 times less risky than Microelectronics. It trades about 0.05 of its potential returns per unit of risk. Microelectronics Technology is currently generating about -0.03 per unit of risk. If you would invest 6,760 in Asia Metal Industries on August 31, 2024 and sell it today you would earn a total of 2,340 from holding Asia Metal Industries or generate 34.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asia Metal Industries vs. Microelectronics Technology
Performance |
| Timeline |
| Asia Metal Industries |
| Microelectronics Tec |
Asia Metal and Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asia Metal and Microelectronics
The main advantage of trading using opposite Asia Metal and Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Metal position performs unexpectedly, 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 Microelectronics will offset losses from the drop in Microelectronics' long position.| Asia Metal vs. Golden Friends | Asia Metal vs. Sunonwealth Electric Machine | Asia Metal vs. Rechi Precision Co | Asia Metal vs. Fittech Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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