Correlation Between SS TECH and DAP

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

By analyzing existing cross correlation between SS TECH and DAP Corporation, you can compare the effects of market volatilities on SS TECH and DAP 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 SS TECH with a short position of DAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of SS TECH and DAP.

Diversification Opportunities for SS TECH and DAP

-0.25

Correlation Coefficient

SS TECH  DAP

Very good diversification

The 3 months correlation between 101490 and DAP is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SS TECH and DAP Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAP Corporation and SS TECH 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 SS TECH are associated (or correlated) with DAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAP Corporation has no effect on the direction of SS TECH i.e., SS TECH and DAP go up and down completely randomly.

Pair Corralation between SS TECH and DAP

Assuming the 90 days trading horizon SS TECH is expected to generate 1.93 times less return on investment than DAP. In addition to that, SS TECH is 1.22 times more volatile than DAP Corporation. It trades about 0.05 of its total potential returns per unit of risk. DAP Corporation is currently generating about 0.11 per unit of volatility. If you would invest  202,000  in DAP Corporation on September 14, 2024 and sell it today you would earn a total of  32,000  from holding DAP Corporation or generate 15.84% return on investment over 90 days.

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

SS TECH  vs.  DAP Corp.

SS TECH

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SS TECH are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SS TECH may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DAP Corporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DAP Corporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DAP sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SS TECH and DAP

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

The idea behind SS TECH and DAP Corporation 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.