Correlation Between Daqo New and Blackline
Can any of the company-specific risk be diversified away by investing in both Daqo New and Blackline 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 Daqo New and Blackline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daqo New Energy and Blackline, you can compare the effects of market volatilities on Daqo New and Blackline 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 Daqo New with a short position of Blackline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daqo New and Blackline.
Diversification Opportunities for Daqo New and Blackline
Poor diversification
The 3 months correlation between Daqo and Blackline is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Daqo New Energy and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline and Daqo New 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 Daqo New Energy are associated (or correlated) with Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of Daqo New i.e., Daqo New and Blackline go up and down completely randomly.
Pair Corralation between Daqo New and Blackline
Allowing for the 90-day total investment horizon Daqo New Energy is expected to under-perform the Blackline. In addition to that, Daqo New is 2.7 times more volatile than Blackline. It trades about -0.3 of its total potential returns per unit of risk. Blackline is currently generating about 0.21 per unit of volatility. If you would invest 5,704 in Blackline on August 27, 2024 and sell it today you would earn a total of 573.00 from holding Blackline or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daqo New Energy vs. Blackline
Performance |
| Timeline |
| Daqo New Energy |
| Blackline |
Daqo New and Blackline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daqo New and Blackline
The main advantage of trading using opposite Daqo New and Blackline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daqo New position performs unexpectedly, Blackline 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 Blackline will offset losses from the drop in Blackline's long position.The idea behind Daqo New Energy and Blackline 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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