Correlation Between Ambarella and Daqo New

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

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

Diversification Opportunities for Ambarella and Daqo New

-0.51

Correlation Coefficient

Ambarella  Daqo New

Excellent diversification

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

Pair Corralation between Ambarella and Daqo New

Given the investment horizon of 90 days Ambarella is expected to generate 0.43 times more return on investment than Daqo New. However, Ambarella is 2.3 times less risky than Daqo New. It trades about 0.18 of its potential returns per unit of risk. Daqo New Energy is currently generating about -0.03 per unit of risk. If you would invest  5,620  in Ambarella on October 4, 2024 and sell it today you would earn a total of  1,861  from holding Ambarella or generate 33.11% return on investment over 90 days.

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

Ambarella  vs.  Daqo New Energy

Ambarella

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Ambarella sustained solid returns over the last few months and may actually be approaching a breakup point.

Daqo New Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daqo New Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Ambarella and Daqo New

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

The idea behind Ambarella and Daqo New Energy 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.