Correlation Between Eternal Asia and Orinko Advanced

Can any of the company-specific risk be diversified away by investing in both Eternal Asia and Orinko 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 Eternal Asia and Orinko Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eternal Asia Supply and Orinko Advanced Plastics, you can compare the effects of market volatilities on Eternal Asia and Orinko 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 Eternal Asia with a short position of Orinko Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eternal Asia and Orinko Advanced.

Diversification Opportunities for Eternal Asia and Orinko Advanced

0.3

Correlation Coefficient

Eternal Asia  Orinko Advanced

Weak diversification

The 3 months correlation between Eternal and Orinko is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Eternal Asia Supply and Orinko Advanced Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orinko Advanced Plastics and Eternal 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 Eternal Asia Supply are associated (or correlated) with Orinko Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orinko Advanced Plastics has no effect on the direction of Eternal Asia i.e., Eternal Asia and Orinko Advanced go up and down completely randomly.

Pair Corralation between Eternal Asia and Orinko Advanced

Assuming the 90 days trading horizon Eternal Asia Supply is expected to under-perform the Orinko Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Eternal Asia Supply is 1.76 times less risky than Orinko Advanced. The stock trades about -0.63 of its potential returns per unit of risk. The Orinko Advanced Plastics is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest  1,250  in Orinko Advanced Plastics on October 12, 2024 and sell it today you would lose (226.00) from holding Orinko Advanced Plastics or give up 18.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Eternal Asia Supply  vs.  Orinko Advanced Plastics

Eternal Asia Supply

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Asia Supply are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eternal Asia sustained solid returns over the last few months and may actually be approaching a breakup point.

Orinko Advanced Plastics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orinko Advanced Plastics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orinko Advanced sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eternal Asia and Orinko Advanced

The main advantage of trading using opposite Eternal Asia and Orinko Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eternal Asia position performs unexpectedly, Orinko 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 Orinko Advanced will offset losses from the drop in Orinko Advanced's long position.

The idea behind Eternal Asia Supply and Orinko Advanced Plastics 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.