Correlation Between Wooyang and Asia Seed

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Can any of the company-specific risk be diversified away by investing in both Wooyang 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 Wooyang and Asia Seed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wooyang Co and Asia Seed CoLtd, you can compare the effects of market volatilities on Wooyang 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 Wooyang with a short position of Asia Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wooyang and Asia Seed.

Diversification Opportunities for Wooyang and Asia Seed

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Wooyang and Asia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Wooyang Co 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 Wooyang 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 Wooyang Co 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 Wooyang i.e., Wooyang and Asia Seed go up and down completely randomly.

Pair Corralation between Wooyang and Asia Seed

Assuming the 90 days trading horizon Wooyang Co is expected to under-perform the Asia Seed. In addition to that, Wooyang is 1.42 times more volatile than Asia Seed CoLtd. It trades about -0.17 of its total potential returns per unit of risk. Asia Seed CoLtd is currently generating about -0.24 per unit of volatility. If you would invest  268,000  in Asia Seed CoLtd on September 5, 2024 and sell it today you would lose (67,500) from holding Asia Seed CoLtd or give up 25.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Wooyang Co  vs.  Asia Seed CoLtd

 Performance 
       Timeline  
Wooyang 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wooyang Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Asia Seed CoLtd 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Asia Seed CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Wooyang and Asia Seed Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wooyang and Asia Seed

The main advantage of trading using opposite Wooyang and Asia Seed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wooyang 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 Wooyang Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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