Correlation Between Daou Data and KEPCO Engineering

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

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

Diversification Opportunities for Daou Data and KEPCO Engineering

0.36

Correlation Coefficient

Daou Data  KEPCO Engineering

Weak diversification

The 3 months correlation between Daou and KEPCO is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Daou Data Corp and KEPCO Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEPCO Engineering and Daou Data 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 Data Corp are associated (or correlated) with KEPCO Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEPCO Engineering has no effect on the direction of Daou Data i.e., Daou Data and KEPCO Engineering go up and down completely randomly.

Pair Corralation between Daou Data and KEPCO Engineering

Assuming the 90 days trading horizon Daou Data Corp is expected to generate 0.72 times more return on investment than KEPCO Engineering. However, Daou Data Corp is 1.39 times less risky than KEPCO Engineering. It trades about 0.17 of its potential returns per unit of risk. KEPCO Engineering Construction is currently generating about 0.11 per unit of risk. If you would invest  1,020,042  in Daou Data Corp on December 24, 2024 and sell it today you would earn a total of  147,958  from holding Daou Data Corp or generate 14.51% return on investment over 90 days.

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

Daou Data Corp  vs.  KEPCO Engineering Construction

Daou Data Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Data Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daou Data sustained solid returns over the last few months and may actually be approaching a breakup point.

KEPCO Engineering

Risk-Adjusted Performance

OK

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

Pair Trading with Daou Data and KEPCO Engineering

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

The idea behind Daou Data Corp and KEPCO Engineering Construction 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.