Correlation Between Asia Pacific and SSI Securities

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

By analyzing existing cross correlation between Asia Pacific Investment and SSI Securities Corp, you can compare the effects of market volatilities on Asia Pacific and SSI Securities 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 Pacific with a short position of SSI Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Pacific and SSI Securities.

Diversification Opportunities for Asia Pacific and SSI Securities

0.71

Correlation Coefficient

Asia Pacific  SSI Securities

Poor diversification

The 3 months correlation between Asia and SSI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Asia Pacific Investment and SSI Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSI Securities Corp and Asia Pacific 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 Pacific Investment are associated (or correlated) with SSI Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSI Securities Corp has no effect on the direction of Asia Pacific i.e., Asia Pacific and SSI Securities go up and down completely randomly.

Pair Corralation between Asia Pacific and SSI Securities

Assuming the 90 days trading horizon Asia Pacific Investment is expected to generate 1.53 times more return on investment than SSI Securities. However, Asia Pacific is 1.53 times more volatile than SSI Securities Corp. It trades about 0.05 of its potential returns per unit of risk. SSI Securities Corp is currently generating about -0.08 per unit of risk. If you would invest  690,000  in Asia Pacific Investment on October 8, 2024 and sell it today you would earn a total of  100,000  from holding Asia Pacific Investment or generate 14.49% return on investment over 90 days.

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

Asia Pacific Investment  vs.  SSI Securities Corp

Asia Pacific Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Pacific Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Asia Pacific is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

SSI Securities Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSI Securities Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, SSI Securities is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Asia Pacific and SSI Securities

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

The idea behind Asia Pacific Investment and SSI Securities Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.