Correlation Between Daqo New and Marketwise

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

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

Diversification Opportunities for Daqo New and Marketwise

0.08

Correlation Coefficient

Daqo New  Marketwise

Significant diversification

The 3 months correlation between Daqo and Marketwise is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Daqo New Energy and Marketwise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marketwise and Daqo New 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 Daqo New Energy are associated (or correlated) with Marketwise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marketwise has no effect on the direction of Daqo New i.e., Daqo New and Marketwise go up and down completely randomly.

Pair Corralation between Daqo New and Marketwise

Allowing for the 90-day total investment horizon Daqo New Energy is expected to generate 0.62 times more return on investment than Marketwise. However, Daqo New Energy is 1.6 times less risky than Marketwise. It trades about -0.01 of its potential returns per unit of risk. Marketwise is currently generating about -0.01 per unit of risk. If you would invest  1,939  in Daqo New Energy on December 28, 2024 and sell it today you would lose (113.00) from holding Daqo New Energy or give up 5.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Daqo New Energy  vs.  Marketwise

Daqo New Energy

Risk-Adjusted Performance

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 relatively invariable basic indicators, Daqo New is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Marketwise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marketwise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Marketwise is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Daqo New and Marketwise

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

The idea behind Daqo New Energy and Marketwise 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.