Correlation Between Daishin Balance and BH

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

Diversification Opportunities for Daishin Balance and BH

0.85

Correlation Coefficient

Daishin Balance  BH

Very poor diversification

The 3 months correlation between Daishin and BH is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance 1 and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Co 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 BH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of Daishin Balance i.e., Daishin Balance and BH go up and down completely randomly.

Pair Corralation between Daishin Balance and BH

Assuming the 90 days trading horizon Daishin Balance 1 is expected to generate 0.81 times more return on investment than BH. However, Daishin Balance 1 is 1.23 times less risky than BH. It trades about -0.08 of its potential returns per unit of risk. BH Co is currently generating about -0.13 per unit of risk. If you would invest  616,000  in Daishin Balance 1 on September 3, 2024 and sell it today you would lose (78,000) from holding Daishin Balance 1 or give up 12.66% of portfolio value over 90 days.

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

Daishin Balance 1  vs.  BH Co

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.

BH Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BH Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daishin Balance and BH

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

The idea behind Daishin Balance 1 and BH Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.