Correlation Between Asia Optical and GeoVision

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

Diversification Opportunities for Asia Optical and GeoVision

-0.68

Correlation Coefficient

Asia Optical  GeoVision

Excellent diversification

The 3 months correlation between Asia and GeoVision is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and GeoVision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoVision 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 GeoVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoVision has no effect on the direction of Asia Optical i.e., Asia Optical and GeoVision go up and down completely randomly.

Pair Corralation between Asia Optical and GeoVision

Assuming the 90 days trading horizon Asia Optical Co is expected to under-perform the GeoVision. In addition to that, Asia Optical is 2.22 times more volatile than GeoVision. It trades about -0.02 of its total potential returns per unit of risk. GeoVision is currently generating about -0.02 per unit of volatility. If you would invest  5,610  in GeoVision on October 23, 2024 and sell it today you would lose (60.00) from holding GeoVision or give up 1.07% of portfolio value over 90 days.

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

Asia Optical Co  vs.  GeoVision

Asia Optical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Optical Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Asia Optical showed solid returns over the last few months and may actually be approaching a breakup point.

GeoVision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GeoVision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 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 GeoVision

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

The idea behind Asia Optical Co and GeoVision 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.