Correlation Between Daou Technology and LX Semicon

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

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

Diversification Opportunities for Daou Technology and LX Semicon

0.05

Correlation Coefficient

Daou Technology  LX Semicon

Significant diversification

The 3 months correlation between Daou and 108320 is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Daou Technology and LX Semicon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LX Semicon 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 LX Semicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LX Semicon has no effect on the direction of Daou Technology i.e., Daou Technology and LX Semicon go up and down completely randomly.

Pair Corralation between Daou Technology and LX Semicon

Assuming the 90 days trading horizon Daou Technology is expected to generate 0.4 times more return on investment than LX Semicon. However, Daou Technology is 2.53 times less risky than LX Semicon. It trades about -0.01 of its potential returns per unit of risk. LX Semicon Co is currently generating about -0.23 per unit of risk. If you would invest  1,855,000  in Daou Technology on September 5, 2024 and sell it today you would lose (7,000) from holding Daou Technology or give up 0.38% of portfolio value over 90 days.

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

Daou Technology  vs.  LX Semicon Co

Daou Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daou Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LX Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LX Semicon 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daou Technology and LX Semicon

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

The idea behind Daou Technology and LX Semicon 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.