Correlation Between Din Capital and Sao Ta

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

By analyzing existing cross correlation between Din Capital Investment and Sao Ta Foods, you can compare the effects of market volatilities on Din Capital and Sao Ta 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 Din Capital with a short position of Sao Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Din Capital and Sao Ta.

Diversification Opportunities for Din Capital and Sao Ta

0.31

Correlation Coefficient

Din Capital  Sao Ta

Weak diversification

The 3 months correlation between Din and Sao is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Din Capital Investment and Sao Ta Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Ta Foods and Din Capital 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 Din Capital Investment are associated (or correlated) with Sao Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Ta Foods has no effect on the direction of Din Capital i.e., Din Capital and Sao Ta go up and down completely randomly.

Pair Corralation between Din Capital and Sao Ta

Assuming the 90 days trading horizon Din Capital Investment is expected to generate 2.34 times more return on investment than Sao Ta. However, Din Capital is 2.34 times more volatile than Sao Ta Foods. It trades about 0.02 of its potential returns per unit of risk. Sao Ta Foods is currently generating about -0.09 per unit of risk. If you would invest  1,000,000  in Din Capital Investment on October 8, 2024 and sell it today you would earn a total of  30,000  from holding Din Capital Investment or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.68%
Values	Daily Returns

Din Capital Investment  vs.  Sao Ta Foods

Din Capital Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Din Capital Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Din Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Sao Ta Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Din Capital and Sao Ta

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

The idea behind Din Capital Investment and Sao Ta Foods 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.