Correlation Between Dragonfly and NewFlex Technology

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

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

Diversification Opportunities for Dragonfly and NewFlex Technology

0.68

Correlation Coefficient

Dragonfly  NewFlex Technology

Poor diversification

The 3 months correlation between Dragonfly and NewFlex is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dragonfly GF Co and NewFlex Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFlex Technology and Dragonfly 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 Dragonfly GF Co are associated (or correlated) with NewFlex Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFlex Technology has no effect on the direction of Dragonfly i.e., Dragonfly and NewFlex Technology go up and down completely randomly.

Pair Corralation between Dragonfly and NewFlex Technology

Assuming the 90 days trading horizon Dragonfly GF Co is expected to generate 1.78 times more return on investment than NewFlex Technology. However, Dragonfly is 1.78 times more volatile than NewFlex Technology Co. It trades about 0.03 of its potential returns per unit of risk. NewFlex Technology Co is currently generating about 0.0 per unit of risk. If you would invest  128,000  in Dragonfly GF Co on October 9, 2024 and sell it today you would earn a total of  1,100  from holding Dragonfly GF Co or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.0%
Values	Daily Returns

Dragonfly GF Co  vs.  NewFlex Technology Co

Dragonfly GF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dragonfly sustained solid returns over the last few months and may actually be approaching a breakup point.

NewFlex Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dragonfly and NewFlex Technology

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

The idea behind Dragonfly GF Co and NewFlex Technology 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.