Correlation Between Sports Gear and Asia Metal

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

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

Diversification Opportunities for Sports Gear and Asia Metal

0.16

Correlation Coefficient

Sports Gear  Asia Metal

Average diversification

The 3 months correlation between Sports and Asia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Asia Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Industries and Sports Gear 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 Sports Gear Co are associated (or correlated) with Asia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Metal Industries has no effect on the direction of Sports Gear i.e., Sports Gear and Asia Metal go up and down completely randomly.

Pair Corralation between Sports Gear and Asia Metal

Assuming the 90 days trading horizon Sports Gear Co is expected to generate 1.35 times more return on investment than Asia Metal. However, Sports Gear is 1.35 times more volatile than Asia Metal Industries. It trades about 0.09 of its potential returns per unit of risk. Asia Metal Industries is currently generating about -0.02 per unit of risk. If you would invest  11,550  in Sports Gear Co on October 25, 2024 and sell it today you would earn a total of  2,050  from holding Sports Gear Co or generate 17.75% return on investment over 90 days.

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

Sports Gear Co  vs.  Asia Metal Industries

Sports Gear

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sports Gear Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sports Gear showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sports Gear and Asia Metal

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

The idea behind Sports Gear Co and Asia Metal Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.