Correlation Between Daishin Balance and INSUN Environmental

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

Diversification Opportunities for Daishin Balance and INSUN Environmental

0.85

Correlation Coefficient

Daishin Balance  INSUN Environmental

Very poor diversification

The 3 months correlation between Daishin and INSUN is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and INSUN Environmental New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSUN Environmental New 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 INSUN Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSUN Environmental New has no effect on the direction of Daishin Balance i.e., Daishin Balance and INSUN Environmental go up and down completely randomly.

Pair Corralation between Daishin Balance and INSUN Environmental

Assuming the 90 days trading horizon Daishin Balance No8 is expected to generate 1.41 times more return on investment than INSUN Environmental. However, Daishin Balance is 1.41 times more volatile than INSUN Environmental New. It trades about -0.01 of its potential returns per unit of risk. INSUN Environmental New is currently generating about -0.02 per unit of risk. If you would invest  564,000  in Daishin Balance No8 on October 7, 2024 and sell it today you would lose (31,000) from holding Daishin Balance No8 or give up 5.5% of portfolio value over 90 days.

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

Daishin Balance No8  vs.  INSUN Environmental New

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daishin Balance and INSUN Environmental

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

The idea behind Daishin Balance No8 and INSUN Environmental New 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.