Correlation Between Pan Asia and Amana Bank

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

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

Diversification Opportunities for Pan Asia and Amana Bank

0.87

Correlation Coefficient

Pan Asia  Amana Bank

Very poor diversification

The 3 months correlation between Pan and Amana is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Banking and Amana Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Bank and Pan 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 Pan Asia Banking are associated (or correlated) with Amana Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Bank has no effect on the direction of Pan Asia i.e., Pan Asia and Amana Bank go up and down completely randomly.

Pair Corralation between Pan Asia and Amana Bank

Assuming the 90 days trading horizon Pan Asia Banking is expected to generate 2.01 times more return on investment than Amana Bank. However, Pan Asia is 2.01 times more volatile than Amana Bank. It trades about 0.59 of its potential returns per unit of risk. Amana Bank is currently generating about 0.36 per unit of risk. If you would invest  2,770  in Pan Asia Banking on October 6, 2024 and sell it today you would earn a total of  990.00  from holding Pan Asia Banking or generate 35.74% return on investment over 90 days.

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

Pan Asia Banking  vs.  Amana Bank

Pan Asia Banking

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Asia Banking are ranked lower than 29 (%) 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.

Amana Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Amana Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pan Asia and Amana Bank

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

The idea behind Pan Asia Banking and Amana Bank 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.