Correlation Between Digital Telecommunicatio and Asia Metal

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

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

Diversification Opportunities for Digital Telecommunicatio and Asia Metal

0.84

Correlation Coefficient

Digital Telecommunicatio  Asia Metal

Very poor diversification

The 3 months correlation between Digital and Asia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Digital Telecommunications Inf 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 Digital Telecommunicatio 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 Digital Telecommunications Infrastructure 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 Digital Telecommunicatio i.e., Digital Telecommunicatio and Asia Metal go up and down completely randomly.

Pair Corralation between Digital Telecommunicatio and Asia Metal

Assuming the 90 days trading horizon Digital Telecommunications Infrastructure is expected to generate 0.25 times more return on investment than Asia Metal. However, Digital Telecommunications Infrastructure is 4.03 times less risky than Asia Metal. It trades about -0.11 of its potential returns per unit of risk. Asia Metal Public is currently generating about -0.27 per unit of risk. If you would invest  898.00  in Digital Telecommunications Infrastructure on October 6, 2024 and sell it today you would lose (48.00) from holding Digital Telecommunications Infrastructure or give up 5.35% of portfolio value over 90 days.

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

Digital Telecommunications Inf  vs.  Asia Metal Public

Digital Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Telecommunications Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Digital Telecommunicatio 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

0 of 100

Very Weak

Over the last 90 days Asia Metal Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Digital Telecommunicatio and Asia Metal

The main advantage of trading using opposite Digital Telecommunicatio and Asia Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Telecommunicatio 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 Digital Telecommunications Infrastructure 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.