Correlation Between Daqo New and VivoPower International

Can any of the company-specific risk be diversified away by investing in both Daqo New and VivoPower International 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 VivoPower International 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 VivoPower International PLC, you can compare the effects of market volatilities on Daqo New and VivoPower International 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 VivoPower International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daqo New and VivoPower International.

Diversification Opportunities for Daqo New and VivoPower International

-0.26

Correlation Coefficient

Daqo New  VivoPower International

Very good diversification

The 3 months correlation between Daqo and VivoPower is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Daqo New Energy and VivoPower International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VivoPower International 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 VivoPower International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VivoPower International has no effect on the direction of Daqo New i.e., Daqo New and VivoPower International go up and down completely randomly.

Pair Corralation between Daqo New and VivoPower International

Allowing for the 90-day total investment horizon Daqo New Energy is expected to under-perform the VivoPower International. But the stock apears to be less risky and, when comparing its historical volatility, Daqo New Energy is 6.06 times less risky than VivoPower International. The stock trades about -0.01 of its potential returns per unit of risk. The VivoPower International PLC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  134.00  in VivoPower International PLC on December 28, 2024 and sell it today you would earn a total of  284.00  from holding VivoPower International PLC or generate 211.94% return on investment over 90 days.

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

Daqo New Energy  vs.  VivoPower International PLC

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.

VivoPower International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VivoPower International PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VivoPower International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daqo New and VivoPower International

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

The idea behind Daqo New Energy and VivoPower International PLC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.