Correlation Between Asia Metal and Wonderful

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

Diversification Opportunities for Asia Metal and Wonderful

0.27

Correlation Coefficient

Asia Metal  Wonderful

Modest diversification

The 3 months correlation between Asia and Wonderful is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Industries and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech 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 Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of Asia Metal i.e., Asia Metal and Wonderful go up and down completely randomly.

Pair Corralation between Asia Metal and Wonderful

Assuming the 90 days trading horizon Asia Metal Industries is expected to generate 1.18 times more return on investment than Wonderful. However, Asia Metal is 1.18 times more volatile than Wonderful Hi Tech Co. It trades about -0.04 of its potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about -0.07 per unit of risk. If you would invest  8,700  in Asia Metal Industries on October 23, 2024 and sell it today you would lose (730.00) from holding Asia Metal Industries or give up 8.39% 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.  Wonderful Hi Tech Co

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Wonderful Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wonderful Hi Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Asia Metal and Wonderful

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

The idea behind Asia Metal Industries and Wonderful Hi Tech Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.