Correlation Between Topower and Asia Metal

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

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

Diversification Opportunities for Topower and Asia Metal

-0.52

Correlation Coefficient

Topower  Asia Metal

Excellent diversification

The 3 months correlation between Topower and Asia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Topower Co and Asia Metal Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Metal Industries and Topower 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 Topower Co 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 Industries has no effect on the direction of Topower i.e., Topower and Asia Metal go up and down completely randomly.

Pair Corralation between Topower and Asia Metal

Assuming the 90 days trading horizon Topower is expected to generate 2.52 times less return on investment than Asia Metal. But when comparing it to its historical volatility, Topower Co is 1.05 times less risky than Asia Metal. It trades about 0.12 of its potential returns per unit of risk. Asia Metal Industries is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  6,280  in Asia Metal Industries on March 5, 2024 and sell it today you would earn a total of  570.00  from holding Asia Metal Industries or generate 9.08% return on investment over 90 days.

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

Topower Co  vs.  Asia Metal Industries

Topower

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topower Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Topower is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Asia Metal Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Metal Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asia Metal showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topower and Asia Metal

The main advantage of trading using opposite Topower and Asia Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Topower 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 Topower Co and Asia Metal Industries 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.