Correlation Between Asia Metal and XSpring Capital

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

Diversification Opportunities for Asia Metal and XSpring Capital

-0.3

Correlation Coefficient

Asia Metal  XSpring Capital

Very good diversification

The 3 months correlation between Asia and XSpring is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Asia Metal Public and XSpring Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XSpring Capital Public 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 XSpring Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XSpring Capital Public has no effect on the direction of Asia Metal i.e., Asia Metal and XSpring Capital go up and down completely randomly.

Pair Corralation between Asia Metal and XSpring Capital

Assuming the 90 days trading horizon Asia Metal Public is expected to generate 0.58 times more return on investment than XSpring Capital. However, Asia Metal Public is 1.72 times less risky than XSpring Capital. It trades about 0.16 of its potential returns per unit of risk. XSpring Capital Public is currently generating about -0.08 per unit of risk. If you would invest  172.00  in Asia Metal Public on December 29, 2024 and sell it today you would earn a total of  23.00  from holding Asia Metal Public or generate 13.37% return on investment over 90 days.

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

Asia Metal Public  vs.  XSpring Capital Public

Asia Metal Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Metal Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Asia Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

XSpring Capital Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days XSpring Capital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Asia Metal and XSpring Capital

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

The idea behind Asia Metal Public and XSpring Capital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.