Correlation Between Danavation Technologies and AB International

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

By analyzing existing cross correlation between Danavation Technologies Corp and AB International Group, you can compare the effects of market volatilities on Danavation Technologies and AB 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 Danavation Technologies with a short position of AB International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danavation Technologies and AB International.

Diversification Opportunities for Danavation Technologies and AB International

0.2

Correlation Coefficient

Danavation Technologies  AB International

Modest diversification

The 3 months correlation between Danavation and ABQQ is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Danavation Technologies Corp and AB International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB International and Danavation Technologies 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 Danavation Technologies Corp are associated (or correlated) with AB International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB International has no effect on the direction of Danavation Technologies i.e., Danavation Technologies and AB International go up and down completely randomly.

Pair Corralation between Danavation Technologies and AB International

Assuming the 90 days horizon Danavation Technologies is expected to generate 3.65 times less return on investment than AB International. But when comparing it to its historical volatility, Danavation Technologies Corp is 2.56 times less risky than AB International. It trades about 0.06 of its potential returns per unit of risk. AB International Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.08  in AB International Group on December 30, 2024 and sell it today you would lose (0.05) from holding AB International Group or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Danavation Technologies Corp  vs.  AB International Group

Danavation Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Danavation Technologies Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Danavation Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

AB International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AB International Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, AB International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danavation Technologies and AB International

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

The idea behind Danavation Technologies Corp and AB International Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.