Correlation Between Construction JSC and Asia Commercial

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

By analyzing existing cross correlation between Construction JSC No5 and Asia Commercial Bank, you can compare the effects of market volatilities on Construction JSC and Asia Commercial 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 Construction JSC with a short position of Asia Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construction JSC and Asia Commercial.

Diversification Opportunities for Construction JSC and Asia Commercial

0.31

Correlation Coefficient

Construction JSC  Asia Commercial

Weak diversification

The 3 months correlation between Construction and Asia is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Construction JSC No5 and Asia Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Commercial Bank and Construction JSC 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 Construction JSC No5 are associated (or correlated) with Asia Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Commercial Bank has no effect on the direction of Construction JSC i.e., Construction JSC and Asia Commercial go up and down completely randomly.

Pair Corralation between Construction JSC and Asia Commercial

Assuming the 90 days trading horizon Construction JSC is expected to generate 2.01 times less return on investment than Asia Commercial. In addition to that, Construction JSC is 2.26 times more volatile than Asia Commercial Bank. It trades about 0.01 of its total potential returns per unit of risk. Asia Commercial Bank is currently generating about 0.05 per unit of volatility. If you would invest  1,727,240  in Asia Commercial Bank on October 26, 2024 and sell it today you would earn a total of  807,760  from holding Asia Commercial Bank or generate 46.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.59%
Values	Daily Returns

Construction JSC No5  vs.  Asia Commercial Bank

Construction JSC No5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Construction JSC No5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Construction JSC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Asia Commercial Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Commercial Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Asia Commercial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Construction JSC and Asia Commercial

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

The idea behind Construction JSC No5 and Asia Commercial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.