Correlation Between Business Online and Asia Metal

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

By analyzing existing cross correlation between Business Online PCL and Asia Metal Public, you can compare the effects of market volatilities on Business Online and Asia Metal 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 Business Online with a short position of Asia Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Business Online and Asia Metal.

Diversification Opportunities for Business Online and Asia Metal

-0.21

Correlation Coefficient

Business Online  Asia Metal

Very good diversification

The 3 months correlation between Business and Asia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Business Online PCL and Asia Metal Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Public and Business Online 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 Business Online PCL are associated (or correlated) with Asia Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Metal Public has no effect on the direction of Business Online i.e., Business Online and Asia Metal go up and down completely randomly.

Pair Corralation between Business Online and Asia Metal

Assuming the 90 days trading horizon Business Online PCL is expected to under-perform the Asia Metal. In addition to that, Business Online is 1.67 times more volatile than Asia Metal Public. It trades about -0.02 of its total potential returns per unit of risk. Asia Metal Public is currently generating about 0.16 per unit of volatility. If you would invest  172.00  in Asia Metal Public on December 29, 2024 and sell it today you would earn a total of  23.00  from holding Asia Metal Public or generate 13.37% return on investment over 90 days.

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

Business Online PCL  vs.  Asia Metal Public

Business Online PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Business Online PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Business Online is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Asia Metal Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Metal Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Asia Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Business Online and Asia Metal

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

The idea behind Business Online PCL and Asia Metal Public 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.