Correlation Between Daito Trust and VIRGIN WINES

Can any of the company-specific risk be diversified away by investing in both Daito Trust and VIRGIN WINES 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 Daito Trust and VIRGIN WINES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daito Trust Construction and VIRGIN WINES UK, you can compare the effects of market volatilities on Daito Trust and VIRGIN WINES 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 Daito Trust with a short position of VIRGIN WINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and VIRGIN WINES.

Diversification Opportunities for Daito Trust and VIRGIN WINES

0.65

Correlation Coefficient

Daito Trust  VIRGIN WINES

Poor diversification

The 3 months correlation between Daito and VIRGIN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and VIRGIN WINES UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIRGIN WINES UK and Daito Trust 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 Daito Trust Construction are associated (or correlated) with VIRGIN WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIRGIN WINES UK has no effect on the direction of Daito Trust i.e., Daito Trust and VIRGIN WINES go up and down completely randomly.

Pair Corralation between Daito Trust and VIRGIN WINES

Assuming the 90 days horizon Daito Trust Construction is expected to generate 0.15 times more return on investment than VIRGIN WINES. However, Daito Trust Construction is 6.75 times less risky than VIRGIN WINES. It trades about -0.19 of its potential returns per unit of risk. VIRGIN WINES UK is currently generating about -0.12 per unit of risk. If you would invest  10,700  in Daito Trust Construction on December 21, 2024 and sell it today you would lose (1,400) from holding Daito Trust Construction or give up 13.08% of portfolio value over 90 days.

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

Daito Trust Construction  vs.  VIRGIN WINES UK

Daito Trust Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

VIRGIN WINES UK

Risk-Adjusted Performance

Very Weak

Over the last 90 days VIRGIN WINES UK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Daito Trust and VIRGIN WINES

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

The idea behind Daito Trust Construction and VIRGIN WINES UK 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.