Correlation Between Asia Green and Asia Biomass

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

By analyzing existing cross correlation between Asia Green Energy and Asia Biomass Public, you can compare the effects of market volatilities on Asia Green and Asia Biomass 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 Green with a short position of Asia Biomass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Green and Asia Biomass.

Diversification Opportunities for Asia Green and Asia Biomass

0.25

Correlation Coefficient

Asia Green  Asia Biomass

Modest diversification

The 3 months correlation between Asia and Asia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Asia Green Energy and Asia Biomass Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Biomass Public and Asia Green 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 Green Energy are associated (or correlated) with Asia Biomass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Biomass Public has no effect on the direction of Asia Green i.e., Asia Green and Asia Biomass go up and down completely randomly.

Pair Corralation between Asia Green and Asia Biomass

Assuming the 90 days trading horizon Asia Green Energy is expected to generate 1.0 times more return on investment than Asia Biomass. However, Asia Green Energy is 1.0 times less risky than Asia Biomass. It trades about 0.08 of its potential returns per unit of risk. Asia Biomass Public is currently generating about 0.08 per unit of risk. If you would invest  155.00  in Asia Green Energy on September 29, 2024 and sell it today you would lose (30.00) from holding Asia Green Energy or give up 19.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Asia Green Energy  vs.  Asia Biomass Public

Asia Green Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Green Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Asia Biomass Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Biomass Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Asia Green and Asia Biomass

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

The idea behind Asia Green Energy and Asia Biomass 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..