Correlation Between Pan Asia and Metro Systems
Can any of the company-specific risk be diversified away by investing in both Pan Asia and Metro Systems 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 Pan Asia and Metro Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan Asia Footwear and Metro Systems, you can compare the effects of market volatilities on Pan Asia and Metro Systems 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 Pan Asia with a short position of Metro Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Asia and Metro Systems.
Diversification Opportunities for Pan Asia and Metro Systems
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pan and Metro is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Footwear and Metro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Systems and Pan Asia 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 Pan Asia Footwear are associated (or correlated) with Metro Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Systems has no effect on the direction of Pan Asia i.e., Pan Asia and Metro Systems go up and down completely randomly.
Pair Corralation between Pan Asia and Metro Systems
Assuming the 90 days trading horizon Pan Asia Footwear is expected to under-perform the Metro Systems. In addition to that, Pan Asia is 3.44 times more volatile than Metro Systems. It trades about -0.06 of its total potential returns per unit of risk. Metro Systems is currently generating about 0.0 per unit of volatility. If you would invest 785.00 in Metro Systems on October 7, 2024 and sell it today you would earn a total of 0.00 from holding Metro Systems or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan Asia Footwear vs. Metro Systems
Performance |
| Timeline |
| Pan Asia Footwear |
| Metro Systems |
Pan Asia and Metro Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan Asia and Metro Systems
The main advantage of trading using opposite Pan Asia and Metro Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan Asia position performs unexpectedly, Metro Systems 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 Metro Systems will offset losses from the drop in Metro Systems' long position.| Pan Asia vs. Peoples Garment Public | Pan Asia vs. Nawarat Patanakarn Public | Pan Asia vs. KGI Securities Public | Pan Asia vs. Pato Chemical Industry |
| Metro Systems vs. MFEC PCL | Metro Systems vs. Internet Thailand Public | Metro Systems vs. Hana Microelectronics Public | Metro Systems vs. SiS Distribution 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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