Correlation Between Eastern Technical and Asia Precision
Can any of the company-specific risk be diversified away by investing in both Eastern Technical and Asia Precision 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 Eastern Technical and Asia Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Technical Engineering and Asia Precision Public, you can compare the effects of market volatilities on Eastern Technical and Asia Precision 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 Eastern Technical with a short position of Asia Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Technical and Asia Precision.
Diversification Opportunities for Eastern Technical and Asia Precision
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Eastern and Asia is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Technical Engineering and Asia Precision Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Precision Public and Eastern Technical 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 Eastern Technical Engineering are associated (or correlated) with Asia Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Precision Public has no effect on the direction of Eastern Technical i.e., Eastern Technical and Asia Precision go up and down completely randomly.
Pair Corralation between Eastern Technical and Asia Precision
Assuming the 90 days trading horizon Eastern Technical Engineering is expected to under-perform the Asia Precision. But the stock apears to be less risky and, when comparing its historical volatility, Eastern Technical Engineering is 1.57 times less risky than Asia Precision. The stock trades about -0.33 of its potential returns per unit of risk. The Asia Precision Public is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 202.00 in Asia Precision Public on September 1, 2024 and sell it today you would lose (15.00) from holding Asia Precision Public or give up 7.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Eastern Technical Engineering vs. Asia Precision Public
Performance |
| Timeline |
| Eastern Technical |
| Asia Precision Public |
Eastern Technical and Asia Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Technical and Asia Precision
The main advantage of trading using opposite Eastern Technical and Asia Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Technical position performs unexpectedly, Asia Precision 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 Precision will offset losses from the drop in Asia Precision's long position.| Eastern Technical vs. G Capital Public | Eastern Technical vs. Fortune Parts Industry | Eastern Technical vs. Hydrotek Public | Eastern Technical vs. Ama Marine Public |
| Asia Precision vs. AJ Plast Public | Asia Precision vs. AAPICO Hitech Public | Asia Precision vs. Asian Sea | Asia Precision vs. Alucon Public |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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