Correlation Between ASIA Capital and Applied DB

Can any of the company-specific risk be diversified away by investing in both ASIA Capital and Applied DB 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 Capital and Applied DB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASIA Capital Group and Applied DB Public, you can compare the effects of market volatilities on ASIA Capital and Applied DB 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 Capital with a short position of Applied DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASIA Capital and Applied DB.

Diversification Opportunities for ASIA Capital and Applied DB

-0.09

Correlation Coefficient

ASIA Capital  Applied DB

Good diversification

The 3 months correlation between ASIA and Applied is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ASIA Capital Group and Applied DB Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DB Public and ASIA Capital 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 Capital Group are associated (or correlated) with Applied DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DB Public has no effect on the direction of ASIA Capital i.e., ASIA Capital and Applied DB go up and down completely randomly.

Pair Corralation between ASIA Capital and Applied DB

Assuming the 90 days trading horizon ASIA Capital Group is expected to under-perform the Applied DB. In addition to that, ASIA Capital is 4.18 times more volatile than Applied DB Public. It trades about -0.22 of its total potential returns per unit of risk. Applied DB Public is currently generating about 0.1 per unit of volatility. If you would invest  81.00  in Applied DB Public on September 28, 2024 and sell it today you would earn a total of  7.00  from holding Applied DB Public or generate 8.64% return on investment over 90 days.

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

ASIA Capital Group  vs.  Applied DB Public

ASIA Capital Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASIA Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ASIA Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DB Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Applied DB is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ASIA Capital and Applied DB

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

The idea behind ASIA Capital Group and Applied DB Public 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.