Correlation Between Asia Optical and Genius Electronic

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

Diversification Opportunities for Asia Optical and Genius Electronic

0.82

Correlation Coefficient

Asia Optical  Genius Electronic

Very poor diversification

The 3 months correlation between Asia and Genius is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and Genius Electronic Optical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genius Electronic Optical 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 Genius Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genius Electronic Optical has no effect on the direction of Asia Optical i.e., Asia Optical and Genius Electronic go up and down completely randomly.

Pair Corralation between Asia Optical and Genius Electronic

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 1.14 times more return on investment than Genius Electronic. However, Asia Optical is 1.14 times more volatile than Genius Electronic Optical. It trades about 0.09 of its potential returns per unit of risk. Genius Electronic Optical is currently generating about 0.03 per unit of risk. If you would invest  6,580  in Asia Optical Co on October 31, 2024 and sell it today you would earn a total of  9,220  from holding Asia Optical Co or generate 140.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Asia Optical Co  vs.  Genius Electronic Optical

Asia Optical

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Optical Co are ranked lower than 16 (%) 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.

Genius Electronic Optical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genius Electronic Optical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Genius Electronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Asia Optical and Genius Electronic

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

The idea behind Asia Optical Co and Genius Electronic Optical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.