Correlation Between KBSTAR 200TR and Daou Data

Can any of the company-specific risk be diversified away by investing in both KBSTAR 200TR and Daou Data 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 KBSTAR 200TR and Daou Data into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KBSTAR 200TR and Daou Data Corp, you can compare the effects of market volatilities on KBSTAR 200TR and Daou Data 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 KBSTAR 200TR with a short position of Daou Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of KBSTAR 200TR and Daou Data.

Diversification Opportunities for KBSTAR 200TR and Daou Data

0.51

Correlation Coefficient

KBSTAR 200TR  Daou Data

Very weak diversification

The 3 months correlation between KBSTAR and Daou is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding KBSTAR 200TR and Daou Data Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Data Corp and KBSTAR 200TR 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 KBSTAR 200TR are associated (or correlated) with Daou Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Data Corp has no effect on the direction of KBSTAR 200TR i.e., KBSTAR 200TR and Daou Data go up and down completely randomly.

Pair Corralation between KBSTAR 200TR and Daou Data

Assuming the 90 days trading horizon KBSTAR 200TR is expected to generate 2.52 times less return on investment than Daou Data. But when comparing it to its historical volatility, KBSTAR 200TR is 1.57 times less risky than Daou Data. It trades about 0.24 of its potential returns per unit of risk. Daou Data Corp is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  1,007,000  in Daou Data Corp on November 29, 2024 and sell it today you would earn a total of  127,000  from holding Daou Data Corp or generate 12.61% return on investment over 90 days.

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

KBSTAR 200TR  vs.  Daou Data Corp

KBSTAR 200TR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KBSTAR 200TR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KBSTAR 200TR may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Daou Data Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Data Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daou Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KBSTAR 200TR and Daou Data

The main advantage of trading using opposite KBSTAR 200TR and Daou Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBSTAR 200TR position performs unexpectedly, Daou Data 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 Daou Data will offset losses from the drop in Daou Data's long position.

The idea behind KBSTAR 200TR and Daou Data Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.