Correlation Between Incar Financial and Daou Data

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

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

Diversification Opportunities for Incar Financial and Daou Data

0.72

Correlation Coefficient

Incar Financial  Daou Data

Poor diversification

The 3 months correlation between Incar and Daou is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Incar Financial Service 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 Incar Financial 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 Incar Financial Service 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 Incar Financial i.e., Incar Financial and Daou Data go up and down completely randomly.

Pair Corralation between Incar Financial and Daou Data

Assuming the 90 days trading horizon Incar Financial Service is expected to generate 1.74 times more return on investment than Daou Data. However, Incar Financial is 1.74 times more volatile than Daou Data Corp. It trades about 0.16 of its potential returns per unit of risk. Daou Data Corp is currently generating about 0.13 per unit of risk. If you would invest  561,000  in Incar Financial Service on December 30, 2024 and sell it today you would earn a total of  146,000  from holding Incar Financial Service or generate 26.02% return on investment over 90 days.

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

Incar Financial Service  vs.  Daou Data Corp

Incar Financial Service

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Incar Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Daou Data Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Data Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daou Data may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Incar Financial and Daou Data

The main advantage of trading using opposite Incar Financial and Daou Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Incar Financial 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 Incar Financial Service 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.