Correlation Between Asmedia Technology and Lungyen Life

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

By analyzing existing cross correlation between Asmedia Technology and Lungyen Life Service, you can compare the effects of market volatilities on Asmedia Technology and Lungyen Life 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 Asmedia Technology with a short position of Lungyen Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asmedia Technology and Lungyen Life.

Diversification Opportunities for Asmedia Technology and Lungyen Life

0.8

Correlation Coefficient

Asmedia Technology  Lungyen Life

Very poor diversification

The 3 months correlation between Asmedia and Lungyen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology and Lungyen Life Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lungyen Life Service and Asmedia Technology 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 Asmedia Technology are associated (or correlated) with Lungyen Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lungyen Life Service has no effect on the direction of Asmedia Technology i.e., Asmedia Technology and Lungyen Life go up and down completely randomly.

Pair Corralation between Asmedia Technology and Lungyen Life

Assuming the 90 days trading horizon Asmedia Technology is expected to generate 1.55 times more return on investment than Lungyen Life. However, Asmedia Technology is 1.55 times more volatile than Lungyen Life Service. It trades about 0.37 of its potential returns per unit of risk. Lungyen Life Service is currently generating about 0.18 per unit of risk. If you would invest  159,500  in Asmedia Technology on October 1, 2024 and sell it today you would earn a total of  44,000  from holding Asmedia Technology or generate 27.59% return on investment over 90 days.

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

Asmedia Technology  vs.  Lungyen Life Service

Asmedia Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asmedia Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asmedia Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Lungyen Life Service

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lungyen Life Service are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lungyen Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asmedia Technology and Lungyen Life

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

The idea behind Asmedia Technology and Lungyen Life Service 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.