Correlation Between ASICS and Techtronic Industries

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

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

Diversification Opportunities for ASICS and Techtronic Industries

0.55

Correlation Coefficient

ASICS  Techtronic Industries

Very weak diversification

The 3 months correlation between ASICS and Techtronic is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ASICS and Techtronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries and ASICS 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 ASICS are associated (or correlated) with Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of ASICS i.e., ASICS and Techtronic Industries go up and down completely randomly.

Pair Corralation between ASICS and Techtronic Industries

Assuming the 90 days horizon ASICS is expected to generate 3.05 times more return on investment than Techtronic Industries. However, ASICS is 3.05 times more volatile than Techtronic Industries. It trades about 0.2 of its potential returns per unit of risk. Techtronic Industries is currently generating about 0.08 per unit of risk. If you would invest  4,062  in ASICS on January 20, 2024 and sell it today you would earn a total of  538.00  from holding ASICS or generate 13.24% return on investment over 90 days.

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

ASICS  vs.  Techtronic Industries

ASICS

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASICS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, ASICS reported solid returns over the last few months and may actually be approaching a breakup point.

Techtronic Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Techtronic Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Techtronic Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASICS and Techtronic Industries

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

The idea behind ASICS and Techtronic 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.