Correlation Between ASRock and FocalTech Systems

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

By analyzing existing cross correlation between ASRock Inc and FocalTech Systems Co, you can compare the effects of market volatilities on ASRock and FocalTech Systems 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 ASRock with a short position of FocalTech Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASRock and FocalTech Systems.

Diversification Opportunities for ASRock and FocalTech Systems

0.58

Correlation Coefficient

ASRock  FocalTech Systems

Very weak diversification

The 3 months correlation between ASRock and FocalTech is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ASRock Inc and FocalTech Systems Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FocalTech Systems and ASRock 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 ASRock Inc are associated (or correlated) with FocalTech Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FocalTech Systems has no effect on the direction of ASRock i.e., ASRock and FocalTech Systems go up and down completely randomly.

Pair Corralation between ASRock and FocalTech Systems

Assuming the 90 days trading horizon ASRock Inc is expected to generate 1.37 times more return on investment than FocalTech Systems. However, ASRock is 1.37 times more volatile than FocalTech Systems Co. It trades about 0.13 of its potential returns per unit of risk. FocalTech Systems Co is currently generating about 0.16 per unit of risk. If you would invest  20,450  in ASRock Inc on September 15, 2024 and sell it today you would earn a total of  4,150  from holding ASRock Inc or generate 20.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ASRock Inc  vs.  FocalTech Systems Co

ASRock Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASRock Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ASRock showed solid returns over the last few months and may actually be approaching a breakup point.

FocalTech Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FocalTech Systems Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, FocalTech Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASRock and FocalTech Systems

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

The idea behind ASRock Inc and FocalTech Systems 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.