Correlation Between PJ Metal and Daou Technology

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

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

Diversification Opportunities for PJ Metal and Daou Technology

0.66

Correlation Coefficient

PJ Metal  Daou Technology

Poor diversification

The 3 months correlation between 128660 and Daou is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and Daou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Technology and PJ Metal 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 PJ Metal Co are associated (or correlated) with Daou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Technology has no effect on the direction of PJ Metal i.e., PJ Metal and Daou Technology go up and down completely randomly.

Pair Corralation between PJ Metal and Daou Technology

Assuming the 90 days trading horizon PJ Metal Co is expected to under-perform the Daou Technology. In addition to that, PJ Metal is 4.56 times more volatile than Daou Technology. It trades about -0.01 of its total potential returns per unit of risk. Daou Technology is currently generating about 0.04 per unit of volatility. If you would invest  1,796,000  in Daou Technology on September 2, 2024 and sell it today you would earn a total of  31,000  from holding Daou Technology or generate 1.73% return on investment over 90 days.

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

PJ Metal Co  vs.  Daou Technology

PJ Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daou Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daou Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daou Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PJ Metal and Daou Technology

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

The idea behind PJ Metal Co and Daou Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.