Correlation Between Distilleries Company and Pan Asia

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

By analyzing existing cross correlation between Distilleries Company of and Pan Asia Banking, you can compare the effects of market volatilities on Distilleries Company and Pan 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 Distilleries Company with a short position of Pan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distilleries Company and Pan Asia.

Diversification Opportunities for Distilleries Company and Pan Asia

0.24

Correlation Coefficient

Distilleries Company  Pan Asia

Modest diversification

The 3 months correlation between Distilleries and Pan is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Distilleries Company of and Pan Asia Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Asia Banking and Distilleries Company 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 Distilleries Company of are associated (or correlated) with Pan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Asia Banking has no effect on the direction of Distilleries Company i.e., Distilleries Company and Pan Asia go up and down completely randomly.

Pair Corralation between Distilleries Company and Pan Asia

Assuming the 90 days trading horizon Distilleries Company of is expected to under-perform the Pan Asia. But the stock apears to be less risky and, when comparing its historical volatility, Distilleries Company of is 1.71 times less risky than Pan Asia. The stock trades about -0.09 of its potential returns per unit of risk. The Pan Asia Banking is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,120  in Pan Asia Banking on December 27, 2024 and sell it today you would earn a total of  390.00  from holding Pan Asia Banking or generate 12.5% return on investment over 90 days.

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

Distilleries Company of  vs.  Pan Asia Banking

Distilleries Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distilleries Company of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pan Asia Banking

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Asia Banking are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pan Asia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Distilleries Company and Pan Asia

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

The idea behind Distilleries Company of and Pan Asia Banking 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.