Correlation Between ICD and Daishin Balance

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

By analyzing existing cross correlation between ICD Co and Daishin Balance 1, you can compare the effects of market volatilities on ICD and Daishin Balance 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 ICD with a short position of Daishin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and Daishin Balance.

Diversification Opportunities for ICD and Daishin Balance

0.8

Correlation Coefficient

ICD  Daishin Balance

Very poor diversification

The 3 months correlation between ICD and Daishin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and Daishin Balance 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daishin Balance 1 and ICD 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 ICD Co are associated (or correlated) with Daishin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daishin Balance 1 has no effect on the direction of ICD i.e., ICD and Daishin Balance go up and down completely randomly.

Pair Corralation between ICD and Daishin Balance

Assuming the 90 days trading horizon ICD Co is expected to under-perform the Daishin Balance. In addition to that, ICD is 1.02 times more volatile than Daishin Balance 1. It trades about -0.16 of its total potential returns per unit of risk. Daishin Balance 1 is currently generating about -0.03 per unit of volatility. If you would invest  585,000  in Daishin Balance 1 on September 4, 2024 and sell it today you would lose (37,000) from holding Daishin Balance 1 or give up 6.32% of portfolio value over 90 days.

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

ICD Co  vs.  Daishin Balance 1

ICD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICD Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daishin Balance 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daishin Balance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ICD and Daishin Balance

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

The idea behind ICD Co and Daishin Balance 1 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.