Correlation Between Crown Asia and Pacificonline Systems

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Can any of the company-specific risk be diversified away by investing in both Crown Asia and Pacificonline Systems 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 Crown Asia and Pacificonline Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crown Asia Chemicals and Pacificonline Systems, you can compare the effects of market volatilities on Crown Asia and Pacificonline Systems 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 Crown Asia with a short position of Pacificonline Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown Asia and Pacificonline Systems.

Diversification Opportunities for Crown Asia and Pacificonline Systems

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Crown and Pacificonline is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Crown Asia Chemicals and Pacificonline Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacificonline Systems and Crown Asia 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 Crown Asia Chemicals are associated (or correlated) with Pacificonline Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacificonline Systems has no effect on the direction of Crown Asia i.e., Crown Asia and Pacificonline Systems go up and down completely randomly.

Pair Corralation between Crown Asia and Pacificonline Systems

Assuming the 90 days trading horizon Crown Asia is expected to generate 5.54 times less return on investment than Pacificonline Systems. But when comparing it to its historical volatility, Crown Asia Chemicals is 2.12 times less risky than Pacificonline Systems. It trades about 0.07 of its potential returns per unit of risk. Pacificonline Systems is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  265.00  in Pacificonline Systems on December 27, 2024 and sell it today you would earn a total of  144.00  from holding Pacificonline Systems or generate 54.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy96.67%
ValuesDaily Returns

Crown Asia Chemicals  vs.  Pacificonline Systems

 Performance 
       Timeline  
Crown Asia Chemicals 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Crown Asia Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Crown Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.
Pacificonline Systems 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Pacificonline Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Pacificonline Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Crown Asia and Pacificonline Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Crown Asia and Pacificonline Systems

The main advantage of trading using opposite Crown Asia and Pacificonline Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown Asia position performs unexpectedly, Pacificonline Systems 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 Pacificonline Systems will offset losses from the drop in Pacificonline Systems' long position.
The idea behind Crown Asia Chemicals and Pacificonline Systems 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 Stocks Directory module to find actively traded stocks across global markets.

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