Correlation Between Barings BDC and ASE Industrial

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

By analyzing existing cross correlation between Barings BDC and ASE Industrial Holding, you can compare the effects of market volatilities on Barings BDC and ASE Industrial 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 Barings BDC with a short position of ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings BDC and ASE Industrial.

Diversification Opportunities for Barings BDC and ASE Industrial

-0.22

Correlation Coefficient

Barings BDC  ASE Industrial

Very good diversification

The 3 months correlation between Barings and ASE is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Barings BDC 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 Barings BDC are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Barings BDC i.e., Barings BDC and ASE Industrial go up and down completely randomly.

Pair Corralation between Barings BDC and ASE Industrial

Given the investment horizon of 90 days Barings BDC is expected to generate 1.71 times less return on investment than ASE Industrial. But when comparing it to its historical volatility, Barings BDC is 2.49 times less risky than ASE Industrial. It trades about 0.21 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,038  in ASE Industrial Holding on October 23, 2024 and sell it today you would earn a total of  53.50  from holding ASE Industrial Holding or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Barings BDC  vs.  ASE Industrial Holding

Barings BDC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ASE Industrial Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ASE Industrial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barings BDC and ASE Industrial

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

The idea behind Barings BDC and ASE Industrial Holding 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 Global Correlations module to find global opportunities by holding instruments from different markets.