Correlation Between Asia Optical and HannsTouch Solution

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

Diversification Opportunities for Asia Optical and HannsTouch Solution

-0.23

Correlation Coefficient

Asia Optical  HannsTouch Solution

Very good diversification

The 3 months correlation between Asia and HannsTouch is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and HannsTouch Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HannsTouch Solution 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 HannsTouch Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HannsTouch Solution has no effect on the direction of Asia Optical i.e., Asia Optical and HannsTouch Solution go up and down completely randomly.

Pair Corralation between Asia Optical and HannsTouch Solution

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 2.68 times more return on investment than HannsTouch Solution. However, Asia Optical is 2.68 times more volatile than HannsTouch Solution. It trades about -0.04 of its potential returns per unit of risk. HannsTouch Solution is currently generating about -0.15 per unit of risk. If you would invest  16,850  in Asia Optical Co on December 23, 2024 and sell it today you would lose (1,800) from holding Asia Optical Co or give up 10.68% of portfolio value over 90 days.

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

Asia Optical Co  vs.  HannsTouch Solution

Asia Optical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asia Optical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

HannsTouch Solution

Risk-Adjusted Performance

Very Weak

Over the last 90 days HannsTouch Solution 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 April 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 HannsTouch Solution

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

The idea behind Asia Optical Co and HannsTouch Solution 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.