Correlation Between DB Financial and Asia Seed

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

By analyzing existing cross correlation between DB Financial Investment and Asia Seed CoLtd, you can compare the effects of market volatilities on DB Financial and Asia Seed 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 DB Financial with a short position of Asia Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Asia Seed.

Diversification Opportunities for DB Financial and Asia Seed

-0.43

Correlation Coefficient

DB Financial  Asia Seed

Very good diversification

The 3 months correlation between 016610 and Asia is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Asia Seed CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Seed CoLtd and DB Financial 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 DB Financial Investment are associated (or correlated) with Asia Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Seed CoLtd has no effect on the direction of DB Financial i.e., DB Financial and Asia Seed go up and down completely randomly.

Pair Corralation between DB Financial and Asia Seed

Assuming the 90 days trading horizon DB Financial is expected to generate 2.61 times less return on investment than Asia Seed. But when comparing it to its historical volatility, DB Financial Investment is 4.69 times less risky than Asia Seed. It trades about 0.23 of its potential returns per unit of risk. Asia Seed CoLtd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  193,500  in Asia Seed CoLtd on December 30, 2024 and sell it today you would earn a total of  62,500  from holding Asia Seed CoLtd or generate 32.3% return on investment over 90 days.

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

DB Financial Investment  vs.  Asia Seed CoLtd

DB Financial Investment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Asia Seed CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Seed CoLtd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Asia Seed sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DB Financial and Asia Seed

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

The idea behind DB Financial Investment and Asia Seed CoLtd 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.