Correlation Between Security Bank and Asia United
Can any of the company-specific risk be diversified away by investing in both Security Bank and Asia United 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 Security Bank and Asia United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Security Bank Corp and Asia United Bank, you can compare the effects of market volatilities on Security Bank and Asia United 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 Security Bank with a short position of Asia United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Security Bank and Asia United.
Diversification Opportunities for Security Bank and Asia United
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Security and Asia is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Security Bank Corp and Asia United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia United Bank and Security Bank 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 Security Bank Corp are associated (or correlated) with Asia United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia United Bank has no effect on the direction of Security Bank i.e., Security Bank and Asia United go up and down completely randomly.
Pair Corralation between Security Bank and Asia United
Assuming the 90 days trading horizon Security Bank Corp is expected to under-perform the Asia United. In addition to that, Security Bank is 1.29 times more volatile than Asia United Bank. It trades about -0.08 of its total potential returns per unit of risk. Asia United Bank is currently generating about 0.33 per unit of volatility. If you would invest 4,950 in Asia United Bank on August 28, 2024 and sell it today you would earn a total of 1,350 from holding Asia United Bank or generate 27.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Security Bank Corp vs. Asia United Bank
Performance |
| Timeline |
| Security Bank Corp |
| Asia United Bank |
Security Bank and Asia United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Security Bank and Asia United
The main advantage of trading using opposite Security Bank and Asia United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Security Bank position performs unexpectedly, Asia United 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 United will offset losses from the drop in Asia United's long position.The idea behind Security Bank Corp and Asia United Bank 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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