Correlation Between Daou Technology and InfoBank

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

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

Diversification Opportunities for Daou Technology and InfoBank

-0.09

Correlation Coefficient

Daou Technology  InfoBank

Good diversification

The 3 months correlation between Daou and InfoBank is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Daou Technology and InfoBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfoBank and Daou Technology 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 Daou Technology are associated (or correlated) with InfoBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfoBank has no effect on the direction of Daou Technology i.e., Daou Technology and InfoBank go up and down completely randomly.

Pair Corralation between Daou Technology and InfoBank

Assuming the 90 days trading horizon Daou Technology is expected to under-perform the InfoBank. But the stock apears to be less risky and, when comparing its historical volatility, Daou Technology is 4.14 times less risky than InfoBank. The stock trades about -0.02 of its potential returns per unit of risk. The InfoBank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  601,911  in InfoBank on October 23, 2024 and sell it today you would earn a total of  163,089  from holding InfoBank or generate 27.1% return on investment over 90 days.

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

Daou Technology  vs.  InfoBank

Daou Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

InfoBank

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Daou Technology and InfoBank

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

The idea behind Daou Technology and InfoBank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.