Correlation Between Shinsegae Food and Daou Data

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

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

Diversification Opportunities for Shinsegae Food and Daou Data

0.53

Correlation Coefficient

Shinsegae Food  Daou Data

Very weak diversification

The 3 months correlation between Shinsegae and Daou is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Food 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 Shinsegae Food 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 Shinsegae Food 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 Shinsegae Food i.e., Shinsegae Food and Daou Data go up and down completely randomly.

Pair Corralation between Shinsegae Food and Daou Data

Assuming the 90 days trading horizon Shinsegae Food is expected to under-perform the Daou Data. But the stock apears to be less risky and, when comparing its historical volatility, Shinsegae Food is 1.52 times less risky than Daou Data. The stock trades about -0.05 of its potential returns per unit of risk. The Daou Data Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,242,651  in Daou Data Corp on September 12, 2024 and sell it today you would lose (233,651) from holding Daou Data Corp or give up 18.8% of portfolio value over 90 days.

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

Shinsegae Food  vs.  Daou Data Corp

Shinsegae Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinsegae Food 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.

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 Shinsegae Food and Daou Data

The main advantage of trading using opposite Shinsegae Food and Daou Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinsegae Food 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 Shinsegae Food 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.