Correlation Between Asia Electronic and Level Biotechnology

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

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

Diversification Opportunities for Asia Electronic and Level Biotechnology

0.61

Correlation Coefficient

Asia Electronic  Level Biotechnology

Poor diversification

The 3 months correlation between Asia and Level is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Asia Electronic Material and Level Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Level Biotechnology and Asia Electronic 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 Electronic Material are associated (or correlated) with Level Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Level Biotechnology has no effect on the direction of Asia Electronic i.e., Asia Electronic and Level Biotechnology go up and down completely randomly.

Pair Corralation between Asia Electronic and Level Biotechnology

Assuming the 90 days trading horizon Asia Electronic Material is expected to under-perform the Level Biotechnology. In addition to that, Asia Electronic is 3.43 times more volatile than Level Biotechnology. It trades about -0.03 of its total potential returns per unit of risk. Level Biotechnology is currently generating about 0.0 per unit of volatility. If you would invest  3,270  in Level Biotechnology on September 14, 2024 and sell it today you would lose (5.00) from holding Level Biotechnology or give up 0.15% of portfolio value over 90 days.

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

Asia Electronic Material  vs.  Level Biotechnology

Asia Electronic Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Electronic Material has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Asia Electronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Level Biotechnology

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Asia Electronic Material and Level Biotechnology 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.