Correlation Between COL Financial and Crown Asia

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

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

Diversification Opportunities for COL Financial and Crown Asia

0.46

Correlation Coefficient

COL Financial  Crown Asia

Very weak diversification

The 3 months correlation between COL and Crown is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding COL Financial Group 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 COL Financial 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 COL Financial Group 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 COL Financial i.e., COL Financial and Crown Asia go up and down completely randomly.

Pair Corralation between COL Financial and Crown Asia

Assuming the 90 days trading horizon COL Financial Group is expected to under-perform the Crown Asia. But the stock apears to be less risky and, when comparing its historical volatility, COL Financial Group is 1.07 times less risky than Crown Asia. The stock trades about -0.01 of its potential returns per unit of risk. The Crown Asia Chemicals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Crown Asia Chemicals on December 21, 2024 and sell it today you would earn a total of  7.00  from holding Crown Asia Chemicals or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.92%
Values	Daily Returns

COL Financial Group  vs.  Crown Asia Chemicals

COL Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days COL Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, COL Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Crown Asia Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crown Asia Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 COL Financial and Crown Asia

The main advantage of trading using opposite COL Financial and Crown Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COL Financial 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 COL Financial Group 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.