Correlation Between Daishin Balance and Phoenix Materials

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

Diversification Opportunities for Daishin Balance and Phoenix Materials

0.79

Correlation Coefficient

Daishin Balance  Phoenix Materials

Poor diversification

The 3 months correlation between Daishin and Phoenix is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and Phoenix Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Materials 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 Phoenix Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Materials has no effect on the direction of Daishin Balance i.e., Daishin Balance and Phoenix Materials go up and down completely randomly.

Pair Corralation between Daishin Balance and Phoenix Materials

Assuming the 90 days trading horizon Daishin Balance No8 is expected to under-perform the Phoenix Materials. But the stock apears to be less risky and, when comparing its historical volatility, Daishin Balance No8 is 1.35 times less risky than Phoenix Materials. The stock trades about 0.0 of its potential returns per unit of risk. The Phoenix Materials Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  78,600  in Phoenix Materials Co on October 24, 2024 and sell it today you would earn a total of  18,100  from holding Phoenix Materials Co or generate 23.03% return on investment over 90 days.

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

Daishin Balance No8  vs.  Phoenix Materials Co

Daishin Balance No8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance No8 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daishin Balance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Phoenix Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix Materials Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Phoenix Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daishin Balance and Phoenix Materials

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

The idea behind Daishin Balance No8 and Phoenix Materials 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.