Correlation Between Optronics Technologies and Daios Plastics

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

By analyzing existing cross correlation between Optronics Technologies SA and Daios Plastics SA, you can compare the effects of market volatilities on Optronics Technologies and Daios Plastics 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 Optronics Technologies with a short position of Daios Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optronics Technologies and Daios Plastics.

Diversification Opportunities for Optronics Technologies and Daios Plastics

0.1

Correlation Coefficient

Optronics Technologies  Daios Plastics

Average diversification

The 3 months correlation between Optronics and Daios is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Optronics Technologies SA and Daios Plastics SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daios Plastics SA and Optronics Technologies 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 Optronics Technologies SA are associated (or correlated) with Daios Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daios Plastics SA has no effect on the direction of Optronics Technologies i.e., Optronics Technologies and Daios Plastics go up and down completely randomly.

Pair Corralation between Optronics Technologies and Daios Plastics

Assuming the 90 days trading horizon Optronics Technologies is expected to generate 2117.0 times less return on investment than Daios Plastics. But when comparing it to its historical volatility, Optronics Technologies SA is 32.29 times less risky than Daios Plastics. It trades about 0.0 of its potential returns per unit of risk. Daios Plastics SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  328.00  in Daios Plastics SA on September 5, 2024 and sell it today you would earn a total of  30.00  from holding Daios Plastics SA or generate 9.15% return on investment over 90 days.

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

Optronics Technologies SA  vs.  Daios Plastics SA

Optronics Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daios Plastics SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daios Plastics SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daios Plastics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optronics Technologies and Daios Plastics

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

The idea behind Optronics Technologies SA and Daios Plastics SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.