Correlation Between Xavis and Daejoo Electronic

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

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

Diversification Opportunities for Xavis and Daejoo Electronic

0.8

Correlation Coefficient

Xavis  Daejoo Electronic

Very poor diversification

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

Pair Corralation between Xavis and Daejoo Electronic

Assuming the 90 days trading horizon Xavis Co is expected to under-perform the Daejoo Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Xavis Co is 1.84 times less risky than Daejoo Electronic. The stock trades about -0.35 of its potential returns per unit of risk. The Daejoo Electronic Materials is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  11,470,000  in Daejoo Electronic Materials on September 1, 2024 and sell it today you would lose (3,160,000) from holding Daejoo Electronic Materials or give up 27.55% of portfolio value over 90 days.

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

Xavis Co  vs.  Daejoo Electronic Materials

Xavis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xavis 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Daejoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejoo Electronic Materials 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Xavis and Daejoo Electronic

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

The idea behind Xavis Co and Daejoo Electronic Materials 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.