Correlation Between Asia United and Crown Asia

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

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

Diversification Opportunities for Asia United and Crown Asia

-0.19

Correlation Coefficient

Asia United  Crown Asia

Good diversification

The 3 months correlation between Asia and Crown is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Asia United Bank and Crown Asia Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Asia Chemicals and Asia United 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 United Bank are associated (or correlated) with Crown Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Asia Chemicals has no effect on the direction of Asia United i.e., Asia United and Crown Asia go up and down completely randomly.

Pair Corralation between Asia United and Crown Asia

Assuming the 90 days trading horizon Asia United Bank is expected to generate 0.81 times more return on investment than Crown Asia. However, Asia United Bank is 1.23 times less risky than Crown Asia. It trades about 0.24 of its potential returns per unit of risk. Crown Asia Chemicals is currently generating about -0.01 per unit of risk. If you would invest  3,913  in Asia United Bank on September 14, 2024 and sell it today you would earn a total of  2,337  from holding Asia United Bank or generate 59.72% return on investment over 90 days.

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

Asia United Bank  vs.  Crown Asia Chemicals

Asia United Bank

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Asia United exhibited solid returns over the last few months and may actually be approaching a breakup point.

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crown Asia is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Asia United and Crown Asia

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

The idea behind Asia United Bank and Crown Asia Chemicals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.