Correlation Between HB Technology and Daol Investment

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

By analyzing existing cross correlation between HB Technology TD and Daol Investment Securities, you can compare the effects of market volatilities on HB Technology and Daol Investment 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 HB Technology with a short position of Daol Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of HB Technology and Daol Investment.

Diversification Opportunities for HB Technology and Daol Investment

0.96

Correlation Coefficient

HB Technology  Daol Investment

Almost no diversification

The 3 months correlation between 078150 and Daol is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding HB Technology TD and Daol Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daol Investment Secu and HB Technology 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 HB Technology TD are associated (or correlated) with Daol Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daol Investment Secu has no effect on the direction of HB Technology i.e., HB Technology and Daol Investment go up and down completely randomly.

Pair Corralation between HB Technology and Daol Investment

Assuming the 90 days trading horizon HB Technology TD is expected to under-perform the Daol Investment. In addition to that, HB Technology is 2.45 times more volatile than Daol Investment Securities. It trades about -0.06 of its total potential returns per unit of risk. Daol Investment Securities is currently generating about -0.11 per unit of volatility. If you would invest  302,500  in Daol Investment Securities on September 20, 2024 and sell it today you would lose (29,500) from holding Daol Investment Securities or give up 9.75% of portfolio value over 90 days.

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

HB Technology TD  vs.  Daol Investment Securities

HB Technology TD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HB Technology TD 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.

Daol Investment Secu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daol Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with HB Technology and Daol Investment

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

The idea behind HB Technology TD and Daol Investment Securities 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.