Correlation Between Daou Technology and THiRA UTECH

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

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

Diversification Opportunities for Daou Technology and THiRA UTECH

0.59

Correlation Coefficient

Daou Technology  THiRA UTECH

Very weak diversification

The 3 months correlation between Daou and THiRA is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Daou Technology and THiRA UTECH LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THiRA UTECH LTD 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 THiRA UTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THiRA UTECH LTD has no effect on the direction of Daou Technology i.e., Daou Technology and THiRA UTECH go up and down completely randomly.

Pair Corralation between Daou Technology and THiRA UTECH

Assuming the 90 days trading horizon Daou Technology is expected to generate 2.03 times less return on investment than THiRA UTECH. But when comparing it to its historical volatility, Daou Technology is 3.47 times less risky than THiRA UTECH. It trades about 0.21 of its potential returns per unit of risk. THiRA UTECH LTD is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  465,000  in THiRA UTECH LTD on October 11, 2024 and sell it today you would earn a total of  41,000  from holding THiRA UTECH LTD or generate 8.82% return on investment over 90 days.

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

Daou Technology  vs.  THiRA UTECH LTD

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.

THiRA UTECH LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THiRA UTECH LTD 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.

Pair Trading with Daou Technology and THiRA UTECH

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

The idea behind Daou Technology and THiRA UTECH LTD 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.