Correlation Between Regional Container and Asia Metal

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

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

Diversification Opportunities for Regional Container and Asia Metal

-0.21

Correlation Coefficient

Regional Container  Asia Metal

Very good diversification

The 3 months correlation between Regional and Asia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines 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 Regional Container 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 Regional Container Lines 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 Regional Container i.e., Regional Container and Asia Metal go up and down completely randomly.

Pair Corralation between Regional Container and Asia Metal

Assuming the 90 days trading horizon Regional Container Lines is expected to under-perform the Asia Metal. In addition to that, Regional Container is 1.02 times more volatile than Asia Metal Public. It trades about -0.06 of its total potential returns per unit of risk. Asia Metal Public is currently generating about -0.03 per unit of volatility. If you would invest  209.00  in Asia Metal Public on December 21, 2024 and sell it today you would lose (12.00) from holding Asia Metal Public or give up 5.74% of portfolio value over 90 days.

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

Regional Container Lines  vs.  Asia Metal Public

Regional Container Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regional Container Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Asia Metal Public

Risk-Adjusted Performance

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 quite persistent fundamental indicators, Asia Metal is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Regional Container and Asia Metal

The main advantage of trading using opposite Regional Container and Asia Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Container 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 Regional Container Lines 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.