Correlation Between DB Insurance and Formetal

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

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

Diversification Opportunities for DB Insurance and Formetal

-0.18

Correlation Coefficient

DB Insurance  Formetal

Good diversification

The 3 months correlation between 005830 and Formetal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding DB Insurance Co and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal and DB Insurance 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 DB Insurance Co are associated (or correlated) with Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of DB Insurance i.e., DB Insurance and Formetal go up and down completely randomly.

Pair Corralation between DB Insurance and Formetal

Assuming the 90 days trading horizon DB Insurance Co is expected to generate 1.01 times more return on investment than Formetal. However, DB Insurance is 1.01 times more volatile than Formetal Co. It trades about 0.04 of its potential returns per unit of risk. Formetal Co is currently generating about 0.01 per unit of risk. If you would invest  8,252,941  in DB Insurance Co on October 4, 2024 and sell it today you would earn a total of  2,007,059  from holding DB Insurance Co or generate 24.32% return on investment over 90 days.

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

DB Insurance Co  vs.  Formetal Co

DB Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Formetal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DB Insurance and Formetal

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

The idea behind DB Insurance Co and Formetal Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.