Correlation Between DB Financial and Daou Data

Can any of the company-specific risk be diversified away by investing in both DB Financial and Daou Data 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 DB Financial and Daou Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DB Financial Investment and Daou Data Corp, you can compare the effects of market volatilities on DB Financial and Daou Data 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 DB Financial with a short position of Daou Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Daou Data.

Diversification Opportunities for DB Financial and Daou Data

0.24

Correlation Coefficient

DB Financial  Daou Data

Modest diversification

The 3 months correlation between 016610 and Daou is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Daou Data Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Data Corp and DB Financial 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 DB Financial Investment are associated (or correlated) with Daou Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Data Corp has no effect on the direction of DB Financial i.e., DB Financial and Daou Data go up and down completely randomly.

Pair Corralation between DB Financial and Daou Data

Assuming the 90 days trading horizon DB Financial Investment is expected to under-perform the Daou Data. In addition to that, DB Financial is 1.24 times more volatile than Daou Data Corp. It trades about -0.07 of its total potential returns per unit of risk. Daou Data Corp is currently generating about -0.02 per unit of volatility. If you would invest  1,036,000  in Daou Data Corp on September 12, 2024 and sell it today you would lose (27,000) from holding Daou Data Corp or give up 2.61% of portfolio value over 90 days.

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

DB Financial Investment  vs.  Daou Data Corp

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Daou Data Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DB Financial and Daou Data

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

The idea behind DB Financial Investment and Daou Data Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.