Correlation Between Asia Metal and Business Online

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Can any of the company-specific risk be diversified away by investing in both Asia Metal and Business Online 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 Business Online into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asia Metal Public and Business Online PCL, you can compare the effects of market volatilities on Asia Metal and Business Online 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 Business Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Metal and Business Online.

Diversification Opportunities for Asia Metal and Business Online

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Asia and Business is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Public and Business Online PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business Online PCL 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 Public are associated (or correlated) with Business Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business Online PCL has no effect on the direction of Asia Metal i.e., Asia Metal and Business Online go up and down completely randomly.

Pair Corralation between Asia Metal and Business Online

Assuming the 90 days trading horizon Asia Metal Public is expected to under-perform the Business Online. But the stock apears to be less risky and, when comparing its historical volatility, Asia Metal Public is 1.52 times less risky than Business Online. The stock trades about -0.29 of its potential returns per unit of risk. The Business Online PCL is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  605.00  in Business Online PCL on September 13, 2024 and sell it today you would lose (40.00) from holding Business Online PCL or give up 6.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Asia Metal Public  vs.  Business Online PCL

 Performance 
       Timeline  
Asia Metal Public 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Asia Metal 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 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.
Business Online PCL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Business Online PCL 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 essential 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 Metal and Business Online Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Asia Metal and Business Online

The main advantage of trading using opposite Asia Metal and Business Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asia Metal position performs unexpectedly, Business Online 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 Business Online will offset losses from the drop in Business Online's long position.
The idea behind Asia Metal Public and Business Online PCL 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.
Check out your portfolio center.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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