Correlation Between Lake Materials and Daou Technology
Can any of the company-specific risk be diversified away by investing in both Lake Materials 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 Lake Materials and Daou Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Materials Co and Daou Technology, you can compare the effects of market volatilities on Lake Materials 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 Lake Materials with a short position of Daou Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Daou Technology.
Diversification Opportunities for Lake Materials and Daou Technology
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Daou is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Daou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Technology and Lake Materials 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 Lake Materials Co 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 Lake Materials i.e., Lake Materials and Daou Technology go up and down completely randomly.
Pair Corralation between Lake Materials and Daou Technology
Assuming the 90 days trading horizon Lake Materials Co is expected to under-perform the Daou Technology. In addition to that, Lake Materials is 2.94 times more volatile than Daou Technology. It trades about -0.14 of its total potential returns per unit of risk. Daou Technology is currently generating about -0.04 per unit of volatility. If you would invest 1,847,000 in Daou Technology on November 7, 2024 and sell it today you would lose (65,000) from holding Daou Technology or give up 3.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. Daou Technology
Performance |
| Timeline |
| Lake Materials |
| Daou Technology |
Lake Materials and Daou Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Daou Technology
The main advantage of trading using opposite Lake Materials and Daou Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials 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.| Lake Materials vs. EV Advanced Material | Lake Materials vs. Inzi Display CoLtd | Lake Materials vs. Top Material Co | Lake Materials vs. Hana Materials |
| Daou Technology vs. DoubleU Games Co | Daou Technology vs. Woori Financial Group | Daou Technology vs. Incar Financial Service | Daou Technology vs. Netmarble Games Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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