Correlation Between Global Standard and Dawonsys CoLtd

Can any of the company-specific risk be diversified away by investing in both Global Standard and Dawonsys CoLtd 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 Dawonsys CoLtd 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 Dawonsys CoLtd, you can compare the effects of market volatilities on Global Standard and Dawonsys CoLtd 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 Dawonsys CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Standard and Dawonsys CoLtd.

Diversification Opportunities for Global Standard and Dawonsys CoLtd

0.58

Correlation Coefficient

Global Standard  Dawonsys CoLtd

Very weak diversification

The 3 months correlation between Global and Dawonsys is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global Standard Technology and Dawonsys CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawonsys CoLtd 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 Dawonsys CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawonsys CoLtd has no effect on the direction of Global Standard i.e., Global Standard and Dawonsys CoLtd go up and down completely randomly.

Pair Corralation between Global Standard and Dawonsys CoLtd

Assuming the 90 days trading horizon Global Standard Technology is expected to generate 1.39 times more return on investment than Dawonsys CoLtd. However, Global Standard is 1.39 times more volatile than Dawonsys CoLtd. It trades about 0.18 of its potential returns per unit of risk. Dawonsys CoLtd is currently generating about -0.01 per unit of risk. If you would invest  1,406,403  in Global Standard Technology on December 2, 2024 and sell it today you would earn a total of  613,597  from holding Global Standard Technology or generate 43.63% return on investment over 90 days.

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

Global Standard Technology  vs.  Dawonsys CoLtd

Global Standard Tech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Standard Technology are ranked lower than 14 (%) 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.

Dawonsys CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dawonsys CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dawonsys CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Standard and Dawonsys CoLtd

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

The idea behind Global Standard Technology and Dawonsys CoLtd 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.