Correlation Between Daou Data and Next Entertainment
Can any of the company-specific risk be diversified away by investing in both Daou Data and Next Entertainment 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 Next Entertainment 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 Next Entertainment World, you can compare the effects of market volatilities on Daou Data and Next Entertainment 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 Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daou Data and Next Entertainment.
Diversification Opportunities for Daou Data and Next Entertainment
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daou and Next is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Daou Data Corp and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World 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 Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of Daou Data i.e., Daou Data and Next Entertainment go up and down completely randomly.
Pair Corralation between Daou Data and Next Entertainment
Assuming the 90 days trading horizon Daou Data Corp is expected to under-perform the Next Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Daou Data Corp is 2.85 times less risky than Next Entertainment. The stock trades about -0.07 of its potential returns per unit of risk. The Next Entertainment World is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 231,000 in Next Entertainment World on August 28, 2024 and sell it today you would lose (2,000) from holding Next Entertainment World or give up 0.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daou Data Corp vs. Next Entertainment World
Performance |
| Timeline |
| Daou Data Corp |
| Next Entertainment World |
Daou Data and Next Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daou Data and Next Entertainment
The main advantage of trading using opposite Daou Data and Next Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daou Data position performs unexpectedly, Next Entertainment 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 Next Entertainment will offset losses from the drop in Next Entertainment's long position.| Daou Data vs. Dongjin Semichem Co | Daou Data vs. AhnLab Inc | Daou Data vs. Posco ICT | Daou Data vs. CJ ENM |
| Next Entertainment vs. AfreecaTV Co | Next Entertainment vs. SS TECH | Next Entertainment vs. Busan Industrial Co | Next Entertainment 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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