Correlation Between Stark Technology and Daxin Materials

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

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

Diversification Opportunities for Stark Technology and Daxin Materials

-0.16

Correlation Coefficient

Stark Technology  Daxin Materials

Good diversification

The 3 months correlation between Stark and Daxin is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Stark Technology and Daxin Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daxin Materials Corp and Stark Technology 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 Stark Technology are associated (or correlated) with Daxin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daxin Materials Corp has no effect on the direction of Stark Technology i.e., Stark Technology and Daxin Materials go up and down completely randomly.

Pair Corralation between Stark Technology and Daxin Materials

Assuming the 90 days trading horizon Stark Technology is expected to generate 0.4 times more return on investment than Daxin Materials. However, Stark Technology is 2.51 times less risky than Daxin Materials. It trades about 0.11 of its potential returns per unit of risk. Daxin Materials Corp is currently generating about -0.02 per unit of risk. If you would invest  12,100  in Stark Technology on September 15, 2024 and sell it today you would earn a total of  1,250  from holding Stark Technology or generate 10.33% return on investment over 90 days.

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

Stark Technology  vs.  Daxin Materials Corp

Stark Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stark Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Stark Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Daxin Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daxin Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Daxin Materials is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Stark Technology and Daxin Materials

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

The idea behind Stark Technology and Daxin Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.