Correlation Between Daishin Balance and SGA Solutions

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

Diversification Opportunities for Daishin Balance and SGA Solutions

0.7

Correlation Coefficient

Daishin Balance  SGA Solutions

Poor diversification

The 3 months correlation between Daishin and SGA is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and SGA Solutions CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGA Solutions CoLtd 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 SGA Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGA Solutions CoLtd has no effect on the direction of Daishin Balance i.e., Daishin Balance and SGA Solutions go up and down completely randomly.

Pair Corralation between Daishin Balance and SGA Solutions

Assuming the 90 days trading horizon Daishin Balance No8 is expected to under-perform the SGA Solutions. In addition to that, Daishin Balance is 1.66 times more volatile than SGA Solutions CoLtd. It trades about -0.06 of its total potential returns per unit of risk. SGA Solutions CoLtd is currently generating about -0.01 per unit of volatility. If you would invest  49,048  in SGA Solutions CoLtd on October 9, 2024 and sell it today you would lose (1,148) from holding SGA Solutions CoLtd or give up 2.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Daishin Balance No8  vs.  SGA Solutions CoLtd

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.

SGA Solutions CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGA Solutions CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SGA Solutions 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 SGA Solutions

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

The idea behind Daishin Balance No8 and SGA Solutions CoLtd 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.