Correlation Between Alliance Select and Crown Asia

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

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

Diversification Opportunities for Alliance Select and Crown Asia

-0.41

Correlation Coefficient

Alliance Select  Crown Asia

Very good diversification

The 3 months correlation between Alliance and Crown is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods 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 Alliance Select 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 Alliance Select Foods 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 Alliance Select i.e., Alliance Select and Crown Asia go up and down completely randomly.

Pair Corralation between Alliance Select and Crown Asia

Assuming the 90 days trading horizon Alliance Select Foods is expected to under-perform the Crown Asia. In addition to that, Alliance Select is 3.06 times more volatile than Crown Asia Chemicals. It trades about -0.01 of its total potential returns per unit of risk. Crown Asia Chemicals is currently generating about 0.05 per unit of volatility. If you would invest  172.00  in Crown Asia Chemicals on October 27, 2024 and sell it today you would earn a total of  3.00  from holding Crown Asia Chemicals or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	42.11%
Values	Daily Returns

Alliance Select Foods  vs.  Crown Asia Chemicals

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alliance Select is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Crown Asia Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Asia Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Alliance Select and Crown Asia

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

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.