Correlation Between Daido Steel and WIMFARM SA

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

By analyzing existing cross correlation between Daido Steel Co and WIMFARM SA EO, you can compare the effects of market volatilities on Daido Steel and WIMFARM SA 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 Daido Steel with a short position of WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daido Steel and WIMFARM SA.

Diversification Opportunities for Daido Steel and WIMFARM SA

0.77

Correlation Coefficient

Daido Steel  WIMFARM SA

Poor diversification

The 3 months correlation between Daido and WIMFARM is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Daido Steel Co and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO and Daido Steel 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 Daido Steel Co are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of Daido Steel i.e., Daido Steel and WIMFARM SA go up and down completely randomly.

Pair Corralation between Daido Steel and WIMFARM SA

Assuming the 90 days horizon Daido Steel Co is expected to under-perform the WIMFARM SA. But the stock apears to be less risky and, when comparing its historical volatility, Daido Steel Co is 2.46 times less risky than WIMFARM SA. The stock trades about -0.16 of its potential returns per unit of risk. The WIMFARM SA EO is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  417.00  in WIMFARM SA EO on September 12, 2024 and sell it today you would lose (53.00) from holding WIMFARM SA EO or give up 12.71% of portfolio value over 90 days.

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

Daido Steel Co  vs.  WIMFARM SA EO

Daido Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daido Steel Co 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Daido Steel and WIMFARM SA

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

The idea behind Daido Steel Co and WIMFARM SA EO 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.