Correlation Between Asia Optical and Emerging Display

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

By analyzing existing cross correlation between Asia Optical Co and Emerging Display Technologies, you can compare the effects of market volatilities on Asia Optical and Emerging Display 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 Asia Optical with a short position of Emerging Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Optical and Emerging Display.

Diversification Opportunities for Asia Optical and Emerging Display

0.33

Correlation Coefficient

Asia Optical  Emerging Display

Weak diversification

The 3 months correlation between Asia and Emerging is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and Emerging Display Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Display Tec and Asia Optical 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 Asia Optical Co are associated (or correlated) with Emerging Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Display Tec has no effect on the direction of Asia Optical i.e., Asia Optical and Emerging Display go up and down completely randomly.

Pair Corralation between Asia Optical and Emerging Display

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 1.17 times more return on investment than Emerging Display. However, Asia Optical is 1.17 times more volatile than Emerging Display Technologies. It trades about 0.1 of its potential returns per unit of risk. Emerging Display Technologies is currently generating about 0.04 per unit of risk. If you would invest  6,210  in Asia Optical Co on October 10, 2024 and sell it today you would earn a total of  10,790  from holding Asia Optical Co or generate 173.75% return on investment over 90 days.

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

Asia Optical Co  vs.  Emerging Display Technologies

Asia Optical

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Optical Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asia Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Emerging Display Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Display Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerging Display may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Asia Optical and Emerging Display

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

The idea behind Asia Optical Co and Emerging Display Technologies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.