Correlation Between Daiwa House and SoundHound

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

By analyzing existing cross correlation between Daiwa House Industry and SoundHound AI, you can compare the effects of market volatilities on Daiwa House and SoundHound 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 Daiwa House with a short position of SoundHound. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiwa House and SoundHound.

Diversification Opportunities for Daiwa House and SoundHound

0.39

Correlation Coefficient

Daiwa House  SoundHound

Weak diversification

The 3 months correlation between Daiwa and SoundHound is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa House Industry and SoundHound AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoundHound AI and Daiwa House 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 Daiwa House Industry are associated (or correlated) with SoundHound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoundHound AI has no effect on the direction of Daiwa House i.e., Daiwa House and SoundHound go up and down completely randomly.

Pair Corralation between Daiwa House and SoundHound

Assuming the 90 days horizon Daiwa House is expected to generate 32.75 times less return on investment than SoundHound. But when comparing it to its historical volatility, Daiwa House Industry is 5.45 times less risky than SoundHound. It trades about 0.01 of its potential returns per unit of risk. SoundHound AI is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  575.00  in SoundHound AI on October 22, 2024 and sell it today you would earn a total of  789.00  from holding SoundHound AI or generate 137.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.56%
Values	Daily Returns

Daiwa House Industry  vs.  SoundHound AI

Daiwa House Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa House Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Daiwa House is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SoundHound AI

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daiwa House and SoundHound

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

The idea behind Daiwa House Industry and SoundHound AI 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.