Correlation Between Korea Information and Daou Technology

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Can any of the company-specific risk be diversified away by investing in both Korea Information and Daou Technology 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 Korea Information and Daou Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Information Communications and Daou Technology, you can compare the effects of market volatilities on Korea Information and Daou Technology 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 Korea Information with a short position of Daou Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Information and Daou Technology.

Diversification Opportunities for Korea Information and Daou Technology

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Korea and Daou is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Communicatio and Daou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Technology and Korea Information 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 Korea Information Communications are associated (or correlated) with Daou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Technology has no effect on the direction of Korea Information i.e., Korea Information and Daou Technology go up and down completely randomly.

Pair Corralation between Korea Information and Daou Technology

Assuming the 90 days trading horizon Korea Information Communications is expected to under-perform the Daou Technology. In addition to that, Korea Information is 1.21 times more volatile than Daou Technology. It trades about -0.02 of its total potential returns per unit of risk. Daou Technology is currently generating about 0.01 per unit of volatility. If you would invest  1,842,336  in Daou Technology on September 25, 2024 and sell it today you would lose (48,336) from holding Daou Technology or give up 2.62% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Korea Information Communicatio  vs.  Daou Technology

 Performance 
       Timeline  
Korea Information 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Korea Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Daou Technology 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Daou Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daou Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Information and Daou Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Korea Information and Daou Technology

The main advantage of trading using opposite Korea Information and Daou Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Information position performs unexpectedly, Daou Technology 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 Daou Technology will offset losses from the drop in Daou Technology's long position.
The idea behind Korea Information Communications and Daou Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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