Correlation Between DB Financial and PI Advanced

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

Diversification Opportunities for DB Financial and PI Advanced

0.42

Correlation Coefficient

DB Financial  PI Advanced

Very weak diversification

The 3 months correlation between 016610 and 178920 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of DB Financial i.e., DB Financial and PI Advanced go up and down completely randomly.

Pair Corralation between DB Financial and PI Advanced

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 0.33 times more return on investment than PI Advanced. However, DB Financial Investment is 3.01 times less risky than PI Advanced. It trades about 0.15 of its potential returns per unit of risk. PI Advanced Materials is currently generating about 0.04 per unit of risk. If you would invest  540,000  in DB Financial Investment on December 25, 2024 and sell it today you would earn a total of  50,000  from holding DB Financial Investment or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

DB Financial Investment  vs.  PI Advanced Materials

DB Financial Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PI Advanced Materials

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PI Advanced Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PI Advanced may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DB Financial and PI Advanced

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

The idea behind DB Financial Investment and PI Advanced Materials 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.