Correlation Between Daiyang Metal and Shinil Electronics

Can any of the company-specific risk be diversified away by investing in both Daiyang Metal and Shinil Electronics 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 Daiyang Metal and Shinil Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daiyang Metal Co and Shinil Electronics Co, you can compare the effects of market volatilities on Daiyang Metal and Shinil Electronics 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 Daiyang Metal with a short position of Shinil Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiyang Metal and Shinil Electronics.

Diversification Opportunities for Daiyang Metal and Shinil Electronics

0.16

Correlation Coefficient

Daiyang Metal  Shinil Electronics

Average diversification

The 3 months correlation between Daiyang and Shinil is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Daiyang Metal Co and Shinil Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinil Electronics and Daiyang Metal 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 Daiyang Metal Co are associated (or correlated) with Shinil Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinil Electronics has no effect on the direction of Daiyang Metal i.e., Daiyang Metal and Shinil Electronics go up and down completely randomly.

Pair Corralation between Daiyang Metal and Shinil Electronics

Assuming the 90 days trading horizon Daiyang Metal Co is expected to generate 3.97 times more return on investment than Shinil Electronics. However, Daiyang Metal is 3.97 times more volatile than Shinil Electronics Co. It trades about 0.0 of its potential returns per unit of risk. Shinil Electronics Co is currently generating about -0.05 per unit of risk. If you would invest  315,000  in Daiyang Metal Co on October 22, 2024 and sell it today you would lose (155,500) from holding Daiyang Metal Co or give up 49.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.97%
Values	Daily Returns

Daiyang Metal Co  vs.  Shinil Electronics Co

Daiyang Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiyang Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daiyang Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shinil Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinil Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinil Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daiyang Metal and Shinil Electronics

The main advantage of trading using opposite Daiyang Metal and Shinil Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daiyang Metal position performs unexpectedly, Shinil Electronics 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 Shinil Electronics will offset losses from the drop in Shinil Electronics' long position.

The idea behind Daiyang Metal Co and Shinil Electronics Co 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.