Correlation Between Daiyang Metal and Company K

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

Diversification Opportunities for Daiyang Metal and Company K

-0.24

Correlation Coefficient

Daiyang Metal  Company K

Very good diversification

The 3 months correlation between Daiyang and Company is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Daiyang Metal Co and Company K Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Company K Partners 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 Company K. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Company K Partners has no effect on the direction of Daiyang Metal i.e., Daiyang Metal and Company K go up and down completely randomly.

Pair Corralation between Daiyang Metal and Company K

Assuming the 90 days trading horizon Daiyang Metal Co is expected to under-perform the Company K. But the stock apears to be less risky and, when comparing its historical volatility, Daiyang Metal Co is 1.48 times less risky than Company K. The stock trades about -0.13 of its potential returns per unit of risk. The Company K Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  484,500  in Company K Partners on December 26, 2024 and sell it today you would earn a total of  43,500  from holding Company K Partners or generate 8.98% return on investment over 90 days.

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

Daiyang Metal Co  vs.  Company K Partners

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Company K Partners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Company K Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Company K may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Daiyang Metal and Company K

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

The idea behind Daiyang Metal Co and Company K Partners 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.