Correlation Between Asia Metal and Tah Tong

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

By analyzing existing cross correlation between Asia Metal Industries and Tah Tong Textile, you can compare the effects of market volatilities on Asia Metal and Tah Tong 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 Metal with a short position of Tah Tong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Metal and Tah Tong.

Diversification Opportunities for Asia Metal and Tah Tong

0.21

Correlation Coefficient

Asia Metal  Tah Tong

Modest diversification

The 3 months correlation between Asia and Tah is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Industries and Tah Tong Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tah Tong Textile and Asia Metal 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 Metal Industries are associated (or correlated) with Tah Tong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tah Tong Textile has no effect on the direction of Asia Metal i.e., Asia Metal and Tah Tong go up and down completely randomly.

Pair Corralation between Asia Metal and Tah Tong

Assuming the 90 days trading horizon Asia Metal Industries is expected to under-perform the Tah Tong. In addition to that, Asia Metal is 1.0 times more volatile than Tah Tong Textile. It trades about -0.22 of its total potential returns per unit of risk. Tah Tong Textile is currently generating about -0.05 per unit of volatility. If you would invest  1,400  in Tah Tong Textile on December 21, 2024 and sell it today you would lose (85.00) from holding Tah Tong Textile or give up 6.07% of portfolio value over 90 days.

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

Asia Metal Industries  vs.  Tah Tong Textile

Asia Metal Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asia Metal Industries 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.

Tah Tong Textile

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Asia Metal Industries and Tah Tong Textile 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.