Correlation Between Asia Optical and TUL

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

Diversification Opportunities for Asia Optical and TUL

-0.54

Correlation Coefficient

Asia Optical  TUL

Excellent diversification

The 3 months correlation between Asia and TUL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Asia Optical Co and TUL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUL Corporation 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 TUL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUL Corporation has no effect on the direction of Asia Optical i.e., Asia Optical and TUL go up and down completely randomly.

Pair Corralation between Asia Optical and TUL

Assuming the 90 days trading horizon Asia Optical Co is expected to generate 0.93 times more return on investment than TUL. However, Asia Optical Co is 1.08 times less risky than TUL. It trades about 0.09 of its potential returns per unit of risk. TUL Corporation is currently generating about 0.0 per unit of risk. If you would invest  6,210  in Asia Optical Co on October 13, 2024 and sell it today you would earn a total of  9,440  from holding Asia Optical Co or generate 152.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Asia Optical Co  vs.  TUL Corp.

Asia Optical

Risk-Adjusted Performance

0 of 100

Good

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 fairly weak basic indicators, Asia Optical showed solid returns over the last few months and may actually be approaching a breakup point.

TUL Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TUL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, TUL 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 TUL

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

The idea behind Asia Optical Co and TUL Corporation 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.