Correlation Between Asia United and Figaro Coffee

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

Diversification Opportunities for Asia United and Figaro Coffee

0.49

Correlation Coefficient

Asia United  Figaro Coffee

Very weak diversification

The 3 months correlation between Asia and Figaro is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Asia United Bank and Figaro Coffee Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Figaro Coffee Group 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 Figaro Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Figaro Coffee Group has no effect on the direction of Asia United i.e., Asia United and Figaro Coffee go up and down completely randomly.

Pair Corralation between Asia United and Figaro Coffee

Assuming the 90 days trading horizon Asia United Bank is expected to generate 0.71 times more return on investment than Figaro Coffee. However, Asia United Bank is 1.4 times less risky than Figaro Coffee. It trades about 0.21 of its potential returns per unit of risk. Figaro Coffee Group is currently generating about 0.08 per unit of risk. If you would invest  3,178  in Asia United Bank on October 9, 2024 and sell it today you would earn a total of  3,562  from holding Asia United Bank or generate 112.08% return on investment over 90 days.

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

Asia United Bank  vs.  Figaro Coffee Group

Asia United Bank

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 14 (%) 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.

Figaro Coffee Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Figaro Coffee Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Figaro Coffee exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asia United and Figaro Coffee

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

The idea behind Asia United Bank and Figaro Coffee 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.