Correlation Between Sea Air and Asia Commercial

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

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

Diversification Opportunities for Sea Air and Asia Commercial

-0.12

Correlation Coefficient

Sea Air  Asia Commercial

Good diversification

The 3 months correlation between Sea and Asia is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sea Air Freight 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 Sea Air 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 Sea Air Freight 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 Sea Air i.e., Sea Air and Asia Commercial go up and down completely randomly.

Pair Corralation between Sea Air and Asia Commercial

Assuming the 90 days trading horizon Sea Air Freight is expected to under-perform the Asia Commercial. In addition to that, Sea Air is 1.83 times more volatile than Asia Commercial Bank. It trades about -0.06 of its total potential returns per unit of risk. Asia Commercial Bank is currently generating about 0.0 per unit of volatility. If you would invest  2,490,000  in Asia Commercial Bank on October 25, 2024 and sell it today you would lose (5,000) from holding Asia Commercial Bank or give up 0.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Sea Air Freight  vs.  Asia Commercial Bank

Sea Air Freight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sea Air Freight has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Sea Air 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

0 of 100

Very Weak

Over the last 90 days Asia Commercial Bank has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Sea Air and Asia Commercial

The main advantage of trading using opposite Sea Air and Asia Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea Air 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 Sea Air Freight 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.