Correlation Between Asia Optical and WINSON Machinery

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

Diversification Opportunities for Asia Optical and WINSON Machinery

-0.43

Correlation Coefficient

Asia Optical  WINSON Machinery

Very good diversification

The 3 months correlation between Asia and WINSON is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and WINSON Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINSON Machinery 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 WINSON Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINSON Machinery has no effect on the direction of Asia Optical i.e., Asia Optical and WINSON Machinery go up and down completely randomly.

Pair Corralation between Asia Optical and WINSON Machinery

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 2.04 times more return on investment than WINSON Machinery. However, Asia Optical is 2.04 times more volatile than WINSON Machinery Co. It trades about 0.67 of its potential returns per unit of risk. WINSON Machinery Co is currently generating about -0.25 per unit of risk. If you would invest  10,450  in Asia Optical Co on September 29, 2024 and sell it today you would earn a total of  7,750  from holding Asia Optical Co or generate 74.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Asia Optical Co  vs.  WINSON Machinery Co

Asia Optical

Risk-Adjusted Performance

18 of 100

Solid

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.

WINSON Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WINSON Machinery 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.

Pair Trading with Asia Optical and WINSON Machinery

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

The idea behind Asia Optical Co and WINSON Machinery Co 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.