Correlation Between DB Insurance and Next Entertainment

Can any of the company-specific risk be diversified away by investing in both DB Insurance and Next Entertainment 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 Next Entertainment 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 Next Entertainment World, you can compare the effects of market volatilities on DB Insurance and Next Entertainment 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 Next Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Insurance and Next Entertainment.

Diversification Opportunities for DB Insurance and Next Entertainment

0.0

Correlation Coefficient

DB Insurance  Next Entertainment

Pay attention - limited upside

The 3 months correlation between 005830 and Next is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DB Insurance Co and Next Entertainment World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Entertainment World 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 Next Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Entertainment World has no effect on the direction of DB Insurance i.e., DB Insurance and Next Entertainment go up and down completely randomly.

Pair Corralation between DB Insurance and Next Entertainment

Assuming the 90 days trading horizon DB Insurance Co is expected to under-perform the Next Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, DB Insurance Co is 1.43 times less risky than Next Entertainment. The stock trades about -0.06 of its potential returns per unit of risk. The Next Entertainment World is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  214,000  in Next Entertainment World on December 30, 2024 and sell it today you would lose (15,000) from holding Next Entertainment World or give up 7.01% of portfolio value over 90 days.

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

DB Insurance Co  vs.  Next Entertainment World

DB Insurance

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Next Entertainment World

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DB Insurance and Next Entertainment

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

The idea behind DB Insurance Co and Next Entertainment World 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.