Correlation Between Daishin Balance and Automobile

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

By analyzing existing cross correlation between Daishin Balance No8 and Automobile Pc, you can compare the effects of market volatilities on Daishin Balance and Automobile 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 Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Balance and Automobile.

Diversification Opportunities for Daishin Balance and Automobile

-0.33

Correlation Coefficient

Daishin Balance  Automobile

Very good diversification

The 3 months correlation between Daishin and Automobile is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc 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 No8 are associated (or correlated) with Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of Daishin Balance i.e., Daishin Balance and Automobile go up and down completely randomly.

Pair Corralation between Daishin Balance and Automobile

Assuming the 90 days trading horizon Daishin Balance No8 is expected to generate 2.18 times more return on investment than Automobile. However, Daishin Balance is 2.18 times more volatile than Automobile Pc. It trades about 0.2 of its potential returns per unit of risk. Automobile Pc is currently generating about -0.15 per unit of risk. If you would invest  428,000  in Daishin Balance No8 on December 27, 2024 and sell it today you would earn a total of  186,000  from holding Daishin Balance No8 or generate 43.46% return on investment over 90 days.

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

Daishin Balance No8  vs.  Automobile Pc

Daishin Balance No8

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daishin Balance No8 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daishin Balance sustained solid returns over the last few months and may actually be approaching a breakup point.

Automobile Pc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automobile Pc 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daishin Balance and Automobile

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

The idea behind Daishin Balance No8 and Automobile Pc 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.