Correlation Between Global Standard and Daou Technology

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

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

Diversification Opportunities for Global Standard and Daou Technology

0.78

Correlation Coefficient

Global Standard  Daou Technology

Poor diversification

The 3 months correlation between Global and Daou is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Global Standard Technology and Daou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Technology and Global Standard 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 Global Standard Technology are associated (or correlated) with Daou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Technology has no effect on the direction of Global Standard i.e., Global Standard and Daou Technology go up and down completely randomly.

Pair Corralation between Global Standard and Daou Technology

Assuming the 90 days trading horizon Global Standard is expected to generate 1.22 times less return on investment than Daou Technology. In addition to that, Global Standard is 1.68 times more volatile than Daou Technology. It trades about 0.08 of its total potential returns per unit of risk. Daou Technology is currently generating about 0.17 per unit of volatility. If you would invest  1,668,150  in Daou Technology on December 30, 2024 and sell it today you would earn a total of  324,850  from holding Daou Technology or generate 19.47% return on investment over 90 days.

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

Global Standard Technology  vs.  Daou Technology

Global Standard Tech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Standard Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global Standard sustained solid returns over the last few months and may actually be approaching a breakup point.

Daou Technology

Risk-Adjusted Performance

Good

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

Pair Trading with Global Standard and Daou Technology

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

The idea behind Global Standard Technology and Daou Technology 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.