Correlation Between Pan Asia and AVerMedia Technologies

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

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

Diversification Opportunities for Pan Asia and AVerMedia Technologies

0.53

Correlation Coefficient

Pan Asia  AVerMedia Technologies

Very weak diversification

The 3 months correlation between Pan and AVerMedia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Chemical and AVerMedia Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVerMedia Technologies and Pan Asia 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 Pan Asia Chemical are associated (or correlated) with AVerMedia Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVerMedia Technologies has no effect on the direction of Pan Asia i.e., Pan Asia and AVerMedia Technologies go up and down completely randomly.

Pair Corralation between Pan Asia and AVerMedia Technologies

Assuming the 90 days trading horizon Pan Asia Chemical is expected to under-perform the AVerMedia Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Pan Asia Chemical is 1.85 times less risky than AVerMedia Technologies. The stock trades about -0.18 of its potential returns per unit of risk. The AVerMedia Technologies is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,980  in AVerMedia Technologies on December 30, 2024 and sell it today you would lose (665.00) from holding AVerMedia Technologies or give up 13.35% of portfolio value over 90 days.

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

Pan Asia Chemical  vs.  AVerMedia Technologies

Pan Asia Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pan Asia Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

AVerMedia Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days AVerMedia Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Pan Asia and AVerMedia Technologies

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

The idea behind Pan Asia Chemical and AVerMedia Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.