Correlation Between WM Technology and Dai Nippon

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

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

Diversification Opportunities for WM Technology and Dai Nippon

0.55

Correlation Coefficient

WM Technology  Dai Nippon

Very weak diversification

The 3 months correlation between MAPS and Dai is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding WM Technology and Dai Nippon Printing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dai Nippon Printing and WM Technology 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 WM Technology are associated (or correlated) with Dai Nippon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dai Nippon Printing has no effect on the direction of WM Technology i.e., WM Technology and Dai Nippon go up and down completely randomly.

Pair Corralation between WM Technology and Dai Nippon

Given the investment horizon of 90 days WM Technology is expected to generate 5.03 times more return on investment than Dai Nippon. However, WM Technology is 5.03 times more volatile than Dai Nippon Printing. It trades about 0.15 of its potential returns per unit of risk. Dai Nippon Printing is currently generating about -0.19 per unit of risk. If you would invest  102.00  in WM Technology on January 16, 2024 and sell it today you would earn a total of  16.00  from holding WM Technology or generate 15.69% return on investment over 90 days.

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

WM Technology  vs.  Dai Nippon Printing

WM Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WM Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, WM Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dai Nippon Printing

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Dai Nippon Printing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Dai Nippon is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WM Technology and Dai Nippon

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

The idea behind WM Technology and Dai Nippon Printing 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..