Correlation Between Datavan International and CoAsia Microelectronics

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

By analyzing existing cross correlation between Datavan International and CoAsia Microelectronics, you can compare the effects of market volatilities on Datavan International and CoAsia Microelectronics 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 Datavan International with a short position of CoAsia Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datavan International and CoAsia Microelectronics.

Diversification Opportunities for Datavan International and CoAsia Microelectronics

0.28

Correlation Coefficient

Datavan International  CoAsia Microelectronics

Modest diversification

The 3 months correlation between Datavan and CoAsia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Datavan International and CoAsia Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoAsia Microelectronics and Datavan International 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 Datavan International are associated (or correlated) with CoAsia Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoAsia Microelectronics has no effect on the direction of Datavan International i.e., Datavan International and CoAsia Microelectronics go up and down completely randomly.

Pair Corralation between Datavan International and CoAsia Microelectronics

Assuming the 90 days trading horizon Datavan International is expected to under-perform the CoAsia Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Datavan International is 2.45 times less risky than CoAsia Microelectronics. The stock trades about -0.49 of its potential returns per unit of risk. The CoAsia Microelectronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,845  in CoAsia Microelectronics on October 24, 2024 and sell it today you would earn a total of  75.00  from holding CoAsia Microelectronics or generate 1.95% return on investment over 90 days.

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

Datavan International  vs.  CoAsia Microelectronics

Datavan International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datavan International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Datavan International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CoAsia Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoAsia Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CoAsia Microelectronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Datavan International and CoAsia Microelectronics

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

The idea behind Datavan International and CoAsia Microelectronics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .