Correlation Between DAEMO Engineering and HS Valve

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

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

Diversification Opportunities for DAEMO Engineering and HS Valve

0.44

Correlation Coefficient

DAEMO Engineering  HS Valve

Very weak diversification

The 3 months correlation between DAEMO and 039610 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DAEMO Engineering Co and HS Valve Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HS Valve and DAEMO Engineering 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 DAEMO Engineering Co are associated (or correlated) with HS Valve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HS Valve has no effect on the direction of DAEMO Engineering i.e., DAEMO Engineering and HS Valve go up and down completely randomly.

Pair Corralation between DAEMO Engineering and HS Valve

Assuming the 90 days trading horizon DAEMO Engineering Co is expected to under-perform the HS Valve. But the stock apears to be less risky and, when comparing its historical volatility, DAEMO Engineering Co is 1.18 times less risky than HS Valve. The stock trades about 0.0 of its potential returns per unit of risk. The HS Valve Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  544,000  in HS Valve Co on December 4, 2024 and sell it today you would earn a total of  299,000  from holding HS Valve Co or generate 54.96% return on investment over 90 days.

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

DAEMO Engineering Co  vs.  HS Valve Co

DAEMO Engineering

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DAEMO Engineering Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DAEMO Engineering may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HS Valve

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HS Valve Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HS Valve sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAEMO Engineering and HS Valve

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

The idea behind DAEMO Engineering Co and HS Valve 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.