Correlation Between Asia Metal and Bright Led

Can any of the company-specific risk be diversified away by investing in both Asia Metal and Bright Led 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 Bright Led 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 Bright Led Electronics, you can compare the effects of market volatilities on Asia Metal and Bright Led 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 Bright Led. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Metal and Bright Led.

Diversification Opportunities for Asia Metal and Bright Led

-0.12

Correlation Coefficient

Asia Metal  Bright Led

Good diversification

The 3 months correlation between Asia and Bright is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Industries and Bright Led Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Led Electronics 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 Bright Led. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Led Electronics has no effect on the direction of Asia Metal i.e., Asia Metal and Bright Led go up and down completely randomly.

Pair Corralation between Asia Metal and Bright Led

Assuming the 90 days trading horizon Asia Metal Industries is expected to under-perform the Bright Led. But the stock apears to be less risky and, when comparing its historical volatility, Asia Metal Industries is 2.13 times less risky than Bright Led. The stock trades about -0.26 of its potential returns per unit of risk. The Bright Led Electronics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,100  in Bright Led Electronics on October 26, 2024 and sell it today you would earn a total of  155.00  from holding Bright Led Electronics or generate 7.38% return on investment over 90 days.

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

Asia Metal Industries  vs.  Bright Led Electronics

Asia Metal Industries

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, Asia Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bright Led Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Led Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Bright Led 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 Bright Led

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

The idea behind Asia Metal Industries and Bright Led Electronics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.