Correlation Between Sparx Technology and Asiabasemetals

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

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

Diversification Opportunities for Sparx Technology and Asiabasemetals

0.66

Correlation Coefficient

Sparx Technology  Asiabasemetals

Poor diversification

The 3 months correlation between Sparx and Asiabasemetals is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology and Asiabasemetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiabasemetals and Sparx Technology 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 Sparx Technology are associated (or correlated) with Asiabasemetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiabasemetals has no effect on the direction of Sparx Technology i.e., Sparx Technology and Asiabasemetals go up and down completely randomly.

Pair Corralation between Sparx Technology and Asiabasemetals

Assuming the 90 days trading horizon Sparx Technology is expected to under-perform the Asiabasemetals. But the stock apears to be less risky and, when comparing its historical volatility, Sparx Technology is 1.46 times less risky than Asiabasemetals. The stock trades about -0.11 of its potential returns per unit of risk. The Asiabasemetals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Asiabasemetals on December 24, 2024 and sell it today you would earn a total of  0.00  from holding Asiabasemetals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Sparx Technology  vs.  Asiabasemetals

Sparx Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparx Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Asiabasemetals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asiabasemetals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Asiabasemetals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sparx Technology and Asiabasemetals

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

The idea behind Sparx Technology and Asiabasemetals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.