Correlation Between Emerging Display and Asia Optical

Can any of the company-specific risk be diversified away by investing in both Emerging Display and Asia Optical 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 Emerging Display and Asia Optical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerging Display Technologies and Asia Optical Co, you can compare the effects of market volatilities on Emerging Display and Asia Optical 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 Emerging Display with a short position of Asia Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerging Display and Asia Optical.

Diversification Opportunities for Emerging Display and Asia Optical

0.33

Correlation Coefficient

Emerging Display  Asia Optical

Weak diversification

The 3 months correlation between Emerging and Asia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Display Technologies and Asia Optical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Optical and Emerging Display 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 Emerging Display Technologies are associated (or correlated) with Asia Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Optical has no effect on the direction of Emerging Display i.e., Emerging Display and Asia Optical go up and down completely randomly.

Pair Corralation between Emerging Display and Asia Optical

Assuming the 90 days trading horizon Emerging Display is expected to generate 5.64 times less return on investment than Asia Optical. But when comparing it to its historical volatility, Emerging Display Technologies is 2.34 times less risky than Asia Optical. It trades about 0.1 of its potential returns per unit of risk. Asia Optical Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,350  in Asia Optical Co on October 10, 2024 and sell it today you would earn a total of  6,650  from holding Asia Optical Co or generate 64.25% return on investment over 90 days.

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

Emerging Display Technologies  vs.  Asia Optical Co

Emerging Display Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Display Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerging Display may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Asia Optical

Risk-Adjusted Performance

18 of 100

Good

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.

Pair Trading with Emerging Display and Asia Optical

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

The idea behind Emerging Display Technologies and Asia Optical 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.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.