Correlation Between DB Financial and IC Technology

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

Diversification Opportunities for DB Financial and IC Technology

0.11

Correlation Coefficient

DB Financial  IC Technology

Average diversification

The 3 months correlation between 016610 and 052860 is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and IC Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IC Technology 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 IC Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IC Technology has no effect on the direction of DB Financial i.e., DB Financial and IC Technology go up and down completely randomly.

Pair Corralation between DB Financial and IC Technology

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 0.28 times more return on investment than IC Technology. However, DB Financial Investment is 3.56 times less risky than IC Technology. It trades about 0.04 of its potential returns per unit of risk. IC Technology Co is currently generating about -0.16 per unit of risk. If you would invest  520,000  in DB Financial Investment on October 11, 2024 and sell it today you would earn a total of  5,000  from holding DB Financial Investment or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

DB Financial Investment  vs.  IC Technology Co

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 somewhat strong basic indicators, DB Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

IC Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IC Technology Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IC Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DB Financial and IC Technology

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

The idea behind DB Financial Investment and IC Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.