Correlation Between Daishin Balance and Stic Investments

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

By analyzing existing cross correlation between Daishin Balance 1 and Stic Investments, you can compare the effects of market volatilities on Daishin Balance and Stic Investments 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 Daishin Balance with a short position of Stic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Balance and Stic Investments.

Diversification Opportunities for Daishin Balance and Stic Investments

0.65

Correlation Coefficient

Daishin Balance  Stic Investments

Poor diversification

The 3 months correlation between Daishin and Stic is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance 1 and Stic Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stic Investments and Daishin Balance 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 Daishin Balance 1 are associated (or correlated) with Stic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stic Investments has no effect on the direction of Daishin Balance i.e., Daishin Balance and Stic Investments go up and down completely randomly.

Pair Corralation between Daishin Balance and Stic Investments

Assuming the 90 days trading horizon Daishin Balance 1 is expected to under-perform the Stic Investments. In addition to that, Daishin Balance is 1.08 times more volatile than Stic Investments. It trades about -0.06 of its total potential returns per unit of risk. Stic Investments is currently generating about -0.03 per unit of volatility. If you would invest  881,000  in Stic Investments on September 2, 2024 and sell it today you would lose (53,000) from holding Stic Investments or give up 6.02% of portfolio value over 90 days.

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

Daishin Balance 1  vs.  Stic Investments

Daishin Balance 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Stic Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daishin Balance and Stic Investments

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

The idea behind Daishin Balance 1 and Stic Investments 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.