Correlation Between Asia Metal and East Coast

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

Diversification Opportunities for Asia Metal and East Coast

0.77

Correlation Coefficient

Asia Metal  East Coast

Poor diversification

The 3 months correlation between Asia and East is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Public and East Coast Furnitech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Coast Furnitech 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 East Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Coast Furnitech has no effect on the direction of Asia Metal i.e., Asia Metal and East Coast go up and down completely randomly.

Pair Corralation between Asia Metal and East Coast

Assuming the 90 days trading horizon Asia Metal Public is expected to under-perform the East Coast. But the stock apears to be less risky and, when comparing its historical volatility, Asia Metal Public is 31.26 times less risky than East Coast. The stock trades about -0.02 of its potential returns per unit of risk. The East Coast Furnitech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  175.00  in East Coast Furnitech on September 24, 2024 and sell it today you would lose (133.00) from holding East Coast Furnitech or give up 76.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Asia Metal Public  vs.  East Coast Furnitech

Asia Metal Public

Risk-Adjusted Performance

0 of 100

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.

East Coast Furnitech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Coast Furnitech 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.

Pair Trading with Asia Metal and East Coast

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

The idea behind Asia Metal Public and East Coast Furnitech 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.