Correlation Between AfreecaTV and Pearl Abyss

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

By analyzing existing cross correlation between AfreecaTV Co and Pearl Abyss Corp, you can compare the effects of market volatilities on AfreecaTV and Pearl Abyss 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 AfreecaTV with a short position of Pearl Abyss. Check out your portfolio center. Please also check ongoing floating volatility patterns of AfreecaTV and Pearl Abyss.

Diversification Opportunities for AfreecaTV and Pearl Abyss

-0.01

Correlation Coefficient

AfreecaTV  Pearl Abyss

Good diversification

The 3 months correlation between AfreecaTV and Pearl is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding AfreecaTV Co and Pearl Abyss Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearl Abyss Corp and AfreecaTV 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 AfreecaTV Co are associated (or correlated) with Pearl Abyss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearl Abyss Corp has no effect on the direction of AfreecaTV i.e., AfreecaTV and Pearl Abyss go up and down completely randomly.

Pair Corralation between AfreecaTV and Pearl Abyss

Assuming the 90 days trading horizon AfreecaTV is expected to generate 2.41 times less return on investment than Pearl Abyss. In addition to that, AfreecaTV is 1.0 times more volatile than Pearl Abyss Corp. It trades about 0.05 of its total potential returns per unit of risk. Pearl Abyss Corp is currently generating about 0.11 per unit of volatility. If you would invest  3,405,000  in Pearl Abyss Corp on September 2, 2024 and sell it today you would earn a total of  560,000  from holding Pearl Abyss Corp or generate 16.45% return on investment over 90 days.

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

AfreecaTV Co  vs.  Pearl Abyss Corp

AfreecaTV

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AfreecaTV Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AfreecaTV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pearl Abyss Corp

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with AfreecaTV and Pearl Abyss

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

The idea behind AfreecaTV Co and Pearl Abyss Corp 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.