Correlation Between Asian Sea and Asia Plus

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

By analyzing existing cross correlation between Asian Sea and Asia Plus Group, you can compare the effects of market volatilities on Asian Sea and Asia Plus 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 Asian Sea with a short position of Asia Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asian Sea and Asia Plus.

Diversification Opportunities for Asian Sea and Asia Plus

0.89

Correlation Coefficient

Asian Sea  Asia Plus

Very poor diversification

The 3 months correlation between Asian and Asia is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Asian Sea and Asia Plus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Plus Group and Asian Sea 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 Asian Sea are associated (or correlated) with Asia Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Plus Group has no effect on the direction of Asian Sea i.e., Asian Sea and Asia Plus go up and down completely randomly.

Pair Corralation between Asian Sea and Asia Plus

Assuming the 90 days trading horizon Asian Sea is expected to under-perform the Asia Plus. In addition to that, Asian Sea is 2.15 times more volatile than Asia Plus Group. It trades about -0.29 of its total potential returns per unit of risk. Asia Plus Group is currently generating about -0.37 per unit of volatility. If you would invest  242.00  in Asia Plus Group on October 11, 2024 and sell it today you would lose (12.00) from holding Asia Plus Group or give up 4.96% of portfolio value over 90 days.

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

Asian Sea  vs.  Asia Plus Group

Asian Sea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asian Sea 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 drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Asia Plus Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Plus Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic 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 Asian Sea and Asia Plus

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

The idea behind Asian Sea and Asia Plus Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.