Correlation Between NewFlex Technology and Dawonsys CoLtd

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

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

Diversification Opportunities for NewFlex Technology and Dawonsys CoLtd

0.34

Correlation Coefficient

NewFlex Technology  Dawonsys CoLtd

Weak diversification

The 3 months correlation between NewFlex and Dawonsys is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NewFlex Technology Co and Dawonsys CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawonsys CoLtd and NewFlex 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 NewFlex Technology Co are associated (or correlated) with Dawonsys CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawonsys CoLtd has no effect on the direction of NewFlex Technology i.e., NewFlex Technology and Dawonsys CoLtd go up and down completely randomly.

Pair Corralation between NewFlex Technology and Dawonsys CoLtd

Assuming the 90 days trading horizon NewFlex Technology Co is expected to generate 1.7 times more return on investment than Dawonsys CoLtd. However, NewFlex Technology is 1.7 times more volatile than Dawonsys CoLtd. It trades about -0.01 of its potential returns per unit of risk. Dawonsys CoLtd is currently generating about -0.08 per unit of risk. If you would invest  470,500  in NewFlex Technology Co on September 12, 2024 and sell it today you would lose (38,500) from holding NewFlex Technology Co or give up 8.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

NewFlex Technology Co  vs.  Dawonsys CoLtd

NewFlex Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dawonsys CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawonsys CoLtd 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.

Pair Trading with NewFlex Technology and Dawonsys CoLtd

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

The idea behind NewFlex Technology Co and Dawonsys CoLtd 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.