Correlation Between DB Financial and EBEST Investment

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

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

Diversification Opportunities for DB Financial and EBEST Investment

0.49

Correlation Coefficient

DB Financial  EBEST Investment

Very weak diversification

The 3 months correlation between 016610 and EBEST is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and EBEST Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBEST Investment Sec and DB Financial 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 Financial Investment are associated (or correlated) with EBEST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBEST Investment Sec has no effect on the direction of DB Financial i.e., DB Financial and EBEST Investment go up and down completely randomly.

Pair Corralation between DB Financial and EBEST Investment

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 1.39 times more return on investment than EBEST Investment. However, DB Financial is 1.39 times more volatile than EBEST Investment Securities. It trades about -0.1 of its potential returns per unit of risk. EBEST Investment Securities is currently generating about -0.16 per unit of risk. If you would invest  610,000  in DB Financial Investment on September 13, 2024 and sell it today you would lose (82,000) from holding DB Financial Investment or give up 13.44% of portfolio value over 90 days.

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

DB Financial Investment  vs.  EBEST Investment Securities

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

EBEST Investment Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBEST Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DB Financial and EBEST Investment

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

The idea behind DB Financial Investment and EBEST Investment Securities 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..