Correlation Between Daou Technology and Solution Advanced
Can any of the company-specific risk be diversified away by investing in both Daou Technology and Solution Advanced 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 Daou Technology and Solution Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daou Technology and Solution Advanced Technology, you can compare the effects of market volatilities on Daou Technology and Solution Advanced 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 Daou Technology with a short position of Solution Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daou Technology and Solution Advanced.
Diversification Opportunities for Daou Technology and Solution Advanced
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daou and Solution is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Daou Technology and Solution Advanced Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Advanced and Daou 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 Daou Technology are associated (or correlated) with Solution Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Advanced has no effect on the direction of Daou Technology i.e., Daou Technology and Solution Advanced go up and down completely randomly.
Pair Corralation between Daou Technology and Solution Advanced
Assuming the 90 days trading horizon Daou Technology is expected to generate 0.38 times more return on investment than Solution Advanced. However, Daou Technology is 2.65 times less risky than Solution Advanced. It trades about -0.01 of its potential returns per unit of risk. Solution Advanced Technology is currently generating about -0.03 per unit of risk. If you would invest 1,882,000 in Daou Technology on October 13, 2024 and sell it today you would lose (63,000) from holding Daou Technology or give up 3.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daou Technology vs. Solution Advanced Technology
Performance |
| Timeline |
| Daou Technology |
| Solution Advanced |
Daou Technology and Solution Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daou Technology and Solution Advanced
The main advantage of trading using opposite Daou Technology and Solution Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daou Technology position performs unexpectedly, Solution Advanced 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 Solution Advanced will offset losses from the drop in Solution Advanced's long position.| Daou Technology vs. PJ Metal Co | Daou Technology vs. Homecast CoLtd | Daou Technology vs. Digital Power Communications | Daou Technology vs. Daishin Information Communications |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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