Correlation Between Daou Data and Union Materials
Can any of the company-specific risk be diversified away by investing in both Daou Data and Union Materials 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 Union Materials 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 Union Materials Corp, you can compare the effects of market volatilities on Daou Data and Union Materials 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 Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daou Data and Union Materials.
Diversification Opportunities for Daou Data and Union Materials
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Daou and Union is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Daou Data Corp and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp 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 Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Daou Data i.e., Daou Data and Union Materials go up and down completely randomly.
Pair Corralation between Daou Data and Union Materials
Assuming the 90 days trading horizon Daou Data Corp is expected to under-perform the Union Materials. But the stock apears to be less risky and, when comparing its historical volatility, Daou Data Corp is 1.27 times less risky than Union Materials. The stock trades about -0.05 of its potential returns per unit of risk. The Union Materials Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 255,388 in Union Materials Corp on September 13, 2024 and sell it today you would lose (28,888) from holding Union Materials Corp or give up 11.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daou Data Corp vs. Union Materials Corp
Performance |
| Timeline |
| Daou Data Corp |
| Union Materials Corp |
Daou Data and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daou Data and Union Materials
The main advantage of trading using opposite Daou Data and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daou Data position performs unexpectedly, Union Materials 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 Union Materials will offset losses from the drop in Union Materials' long position.| Daou Data vs. KB Financial Group | Daou Data vs. Shinhan Financial Group | Daou Data vs. Hana Financial | Daou Data vs. Woori Financial Group |
| Union Materials vs. Daou Data Corp | Union Materials vs. Solution Advanced Technology | Union Materials vs. Busan Industrial Co | Union Materials vs. Busan Ind |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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