Correlation Between Daqo New and Iveda Solutions

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

By analyzing existing cross correlation between Daqo New Energy and Iveda Solutions, you can compare the effects of market volatilities on Daqo New and Iveda Solutions 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 Daqo New with a short position of Iveda Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daqo New and Iveda Solutions.

Diversification Opportunities for Daqo New and Iveda Solutions

-0.52

Correlation Coefficient

Daqo New  Iveda Solutions

Excellent diversification

The 3 months correlation between Daqo and Iveda is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Daqo New Energy and Iveda Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iveda Solutions and Daqo New 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 Daqo New Energy are associated (or correlated) with Iveda Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iveda Solutions has no effect on the direction of Daqo New i.e., Daqo New and Iveda Solutions go up and down completely randomly.

Pair Corralation between Daqo New and Iveda Solutions

Allowing for the 90-day total investment horizon Daqo New Energy is expected to generate 0.73 times more return on investment than Iveda Solutions. However, Daqo New Energy is 1.38 times less risky than Iveda Solutions. It trades about 0.11 of its potential returns per unit of risk. Iveda Solutions is currently generating about -0.05 per unit of risk. If you would invest  1,473  in Daqo New Energy on August 30, 2024 and sell it today you would earn a total of  546.00  from holding Daqo New Energy or generate 37.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Daqo New Energy  vs.  Iveda Solutions

Daqo New Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daqo New Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Daqo New reported solid returns over the last few months and may actually be approaching a breakup point.

Iveda Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iveda Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental 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 Daqo New and Iveda Solutions

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

The idea behind Daqo New Energy and Iveda Solutions 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.