Correlation Between Dufu Tech and ECS ICT

Can any of the company-specific risk be diversified away by investing in both Dufu Tech and ECS ICT 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 Dufu Tech and ECS ICT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dufu Tech Corp and ECS ICT Bhd, you can compare the effects of market volatilities on Dufu Tech and ECS ICT 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 Dufu Tech with a short position of ECS ICT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dufu Tech and ECS ICT.

Diversification Opportunities for Dufu Tech and ECS ICT

0.6

Correlation Coefficient

Dufu Tech  ECS ICT

Poor diversification

The 3 months correlation between Dufu and ECS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dufu Tech Corp and ECS ICT Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECS ICT Bhd and Dufu Tech 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 Dufu Tech Corp are associated (or correlated) with ECS ICT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECS ICT Bhd has no effect on the direction of Dufu Tech i.e., Dufu Tech and ECS ICT go up and down completely randomly.

Pair Corralation between Dufu Tech and ECS ICT

Assuming the 90 days trading horizon Dufu Tech Corp is expected to generate 0.63 times more return on investment than ECS ICT. However, Dufu Tech Corp is 1.58 times less risky than ECS ICT. It trades about -0.19 of its potential returns per unit of risk. ECS ICT Bhd is currently generating about -0.2 per unit of risk. If you would invest  191.00  in Dufu Tech Corp on October 25, 2024 and sell it today you would lose (13.00) from holding Dufu Tech Corp or give up 6.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Dufu Tech Corp  vs.  ECS ICT Bhd

Dufu Tech Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dufu Tech Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Dufu Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ECS ICT Bhd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECS ICT Bhd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, ECS ICT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dufu Tech and ECS ICT

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

The idea behind Dufu Tech Corp and ECS ICT Bhd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.