Correlation Between Asia Optical and AOPEN

Can any of the company-specific risk be diversified away by investing in both Asia Optical and AOPEN 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 AOPEN 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 AOPEN Inc, you can compare the effects of market volatilities on Asia Optical and AOPEN 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 AOPEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Optical and AOPEN.

Diversification Opportunities for Asia Optical and AOPEN

0.34

Correlation Coefficient

Asia Optical  AOPEN

Weak diversification

The 3 months correlation between Asia and AOPEN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and AOPEN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOPEN Inc 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 AOPEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOPEN Inc has no effect on the direction of Asia Optical i.e., Asia Optical and AOPEN go up and down completely randomly.

Pair Corralation between Asia Optical and AOPEN

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 2.52 times more return on investment than AOPEN. However, Asia Optical is 2.52 times more volatile than AOPEN Inc. It trades about 0.07 of its potential returns per unit of risk. AOPEN Inc is currently generating about -0.19 per unit of risk. If you would invest  11,400  in Asia Optical Co on September 17, 2024 and sell it today you would earn a total of  1,400  from holding Asia Optical Co or generate 12.28% 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.  AOPEN Inc

Asia Optical

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Optical Co are ranked lower than 5 (%) 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.

AOPEN Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AOPEN Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Asia Optical and AOPEN

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

The idea behind Asia Optical Co and AOPEN Inc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.