Correlation Between Daishin Balance and Genolution

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

Diversification Opportunities for Daishin Balance and Genolution

0.87

Correlation Coefficient

Daishin Balance  Genolution

Very poor diversification

The 3 months correlation between Daishin and Genolution is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and Genolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genolution 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 Genolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genolution has no effect on the direction of Daishin Balance i.e., Daishin Balance and Genolution go up and down completely randomly.

Pair Corralation between Daishin Balance and Genolution

Assuming the 90 days trading horizon Daishin Balance No8 is expected to generate 1.3 times more return on investment than Genolution. However, Daishin Balance is 1.3 times more volatile than Genolution. It trades about 0.03 of its potential returns per unit of risk. Genolution is currently generating about -0.03 per unit of risk. If you would invest  477,000  in Daishin Balance No8 on October 13, 2024 and sell it today you would earn a total of  65,000  from holding Daishin Balance No8 or generate 13.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Daishin Balance No8  vs.  Genolution

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Genolution

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genolution has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Daishin Balance and Genolution

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

The idea behind Daishin Balance No8 and Genolution 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.