Correlation Between Four Leaf and Generation Asia

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

By analyzing existing cross correlation between Four Leaf Acquisition and Generation Asia I, you can compare the effects of market volatilities on Four Leaf and Generation 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 Four Leaf with a short position of Generation Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Leaf and Generation Asia.

Diversification Opportunities for Four Leaf and Generation Asia

0.69

Correlation Coefficient

Four Leaf  Generation Asia

Poor diversification

The 3 months correlation between Four and Generation is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Four Leaf Acquisition and Generation Asia I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Asia I and Four Leaf 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 Four Leaf Acquisition are associated (or correlated) with Generation Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Asia I has no effect on the direction of Four Leaf i.e., Four Leaf and Generation Asia go up and down completely randomly.

Pair Corralation between Four Leaf and Generation Asia

Given the investment horizon of 90 days Four Leaf is expected to generate 5.81 times less return on investment than Generation Asia. But when comparing it to its historical volatility, Four Leaf Acquisition is 1.8 times less risky than Generation Asia. It trades about 0.06 of its potential returns per unit of risk. Generation Asia I is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,121  in Generation Asia I on September 3, 2024 and sell it today you would earn a total of  19.00  from holding Generation Asia I or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.69%
Values	Daily Returns

Four Leaf Acquisition  vs.  Generation Asia I

Four Leaf Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Four Leaf Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Four Leaf is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Generation Asia I

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Generation Asia I has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Generation Asia is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Four Leaf and Generation Asia

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

The idea behind Four Leaf Acquisition and Generation Asia I 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.