Correlation Between Daiyang Metal and AptaBio Therapeutics

Can any of the company-specific risk be diversified away by investing in both Daiyang Metal and AptaBio Therapeutics 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 AptaBio Therapeutics 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 AptaBio Therapeutics, you can compare the effects of market volatilities on Daiyang Metal and AptaBio Therapeutics 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 AptaBio Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiyang Metal and AptaBio Therapeutics.

Diversification Opportunities for Daiyang Metal and AptaBio Therapeutics

-0.71

Correlation Coefficient

Daiyang Metal  AptaBio Therapeutics

Pay attention - limited upside

The 3 months correlation between Daiyang and AptaBio is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Daiyang Metal Co and AptaBio Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AptaBio Therapeutics 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 AptaBio Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AptaBio Therapeutics has no effect on the direction of Daiyang Metal i.e., Daiyang Metal and AptaBio Therapeutics go up and down completely randomly.

Pair Corralation between Daiyang Metal and AptaBio Therapeutics

Assuming the 90 days trading horizon Daiyang Metal Co is expected to under-perform the AptaBio Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Daiyang Metal Co is 4.41 times less risky than AptaBio Therapeutics. The stock trades about -0.15 of its potential returns per unit of risk. The AptaBio Therapeutics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  694,000  in AptaBio Therapeutics on November 29, 2024 and sell it today you would earn a total of  106,000  from holding AptaBio Therapeutics or generate 15.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Daiyang Metal Co  vs.  AptaBio Therapeutics

Daiyang Metal

Risk-Adjusted Performance

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.

AptaBio Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AptaBio Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AptaBio Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daiyang Metal and AptaBio Therapeutics

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

The idea behind Daiyang Metal Co and AptaBio Therapeutics 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.