Correlation Between Daou Data and Daedong Gear
Can any of the company-specific risk be diversified away by investing in both Daou Data and Daedong Gear 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 Data and Daedong Gear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daou Data Corp and Daedong Gear Co, you can compare the effects of market volatilities on Daou Data and Daedong Gear 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 Data with a short position of Daedong Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daou Data and Daedong Gear.
Diversification Opportunities for Daou Data and Daedong Gear
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Daou and Daedong is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Daou Data Corp and Daedong Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Gear and Daou Data 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 Data Corp are associated (or correlated) with Daedong Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Gear has no effect on the direction of Daou Data i.e., Daou Data and Daedong Gear go up and down completely randomly.
Pair Corralation between Daou Data and Daedong Gear
Assuming the 90 days trading horizon Daou Data Corp is expected to under-perform the Daedong Gear. But the stock apears to be less risky and, when comparing its historical volatility, Daou Data Corp is 8.76 times less risky than Daedong Gear. The stock trades about -0.18 of its potential returns per unit of risk. The Daedong Gear Co is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 800,000 in Daedong Gear Co on September 4, 2024 and sell it today you would earn a total of 727,000 from holding Daedong Gear Co or generate 90.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daou Data Corp vs. Daedong Gear Co
Performance |
| Timeline |
| Daou Data Corp |
| Daedong Gear |
Daou Data and Daedong Gear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daou Data and Daedong Gear
The main advantage of trading using opposite Daou Data and Daedong Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daou Data position performs unexpectedly, Daedong Gear 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 Daedong Gear will offset losses from the drop in Daedong Gear's long position.| Daou Data vs. Dongjin Semichem Co | Daou Data vs. AhnLab Inc | Daou Data vs. Posco ICT | Daou Data vs. CJ ENM |
| Daedong Gear vs. Daou Data Corp | Daedong Gear vs. Ssangyong Information Communication | Daedong Gear vs. Sung Bo Chemicals | Daedong Gear vs. DataSolution |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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