Correlation Between Asahi Songwon and Hindcon Chemicals

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

By analyzing existing cross correlation between Asahi Songwon Colors and Hindcon Chemicals Limited, you can compare the effects of market volatilities on Asahi Songwon and Hindcon Chemicals 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 Asahi Songwon with a short position of Hindcon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asahi Songwon and Hindcon Chemicals.

Diversification Opportunities for Asahi Songwon and Hindcon Chemicals

0.54

Correlation Coefficient

Asahi Songwon  Hindcon Chemicals

Very weak diversification

The 3 months correlation between Asahi and Hindcon is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Asahi Songwon Colors and Hindcon Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindcon Chemicals and Asahi Songwon 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 Asahi Songwon Colors are associated (or correlated) with Hindcon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindcon Chemicals has no effect on the direction of Asahi Songwon i.e., Asahi Songwon and Hindcon Chemicals go up and down completely randomly.

Pair Corralation between Asahi Songwon and Hindcon Chemicals

Assuming the 90 days trading horizon Asahi Songwon Colors is expected to under-perform the Hindcon Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Asahi Songwon Colors is 1.53 times less risky than Hindcon Chemicals. The stock trades about -0.17 of its potential returns per unit of risk. The Hindcon Chemicals Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,923  in Hindcon Chemicals Limited on October 11, 2024 and sell it today you would lose (641.00) from holding Hindcon Chemicals Limited or give up 13.02% of portfolio value over 90 days.

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

Asahi Songwon Colors  vs.  Hindcon Chemicals Limited

Asahi Songwon Colors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asahi Songwon Colors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hindcon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindcon Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Asahi Songwon and Hindcon Chemicals

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

The idea behind Asahi Songwon Colors and Hindcon Chemicals Limited 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.