Correlation Between LockLock and Daou Data

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

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

Diversification Opportunities for LockLock and Daou Data

-0.53

Correlation Coefficient

LockLock  Daou Data

Excellent diversification

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

Pair Corralation between LockLock and Daou Data

Assuming the 90 days trading horizon LockLock Co is expected to under-perform the Daou Data. But the stock apears to be less risky and, when comparing its historical volatility, LockLock Co is 8.3 times less risky than Daou Data. The stock trades about -0.09 of its potential returns per unit of risk. The Daou Data Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,075,000  in Daou Data Corp on September 3, 2024 and sell it today you would earn a total of  6,000  from holding Daou Data Corp or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

LockLock Co  vs.  Daou Data Corp

LockLock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daou Data Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Data Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 LockLock and Daou Data

The main advantage of trading using opposite LockLock and Daou Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LockLock 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 LockLock Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.