Correlation Between Dragonfly and SGA Solutions

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

Diversification Opportunities for Dragonfly and SGA Solutions

0.09

Correlation Coefficient

Dragonfly  SGA Solutions

Significant diversification

The 3 months correlation between Dragonfly and SGA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dragonfly GF Co and SGA Solutions CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGA Solutions CoLtd 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 SGA Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGA Solutions CoLtd has no effect on the direction of Dragonfly i.e., Dragonfly and SGA Solutions go up and down completely randomly.

Pair Corralation between Dragonfly and SGA Solutions

Assuming the 90 days trading horizon Dragonfly is expected to generate 1.14 times less return on investment than SGA Solutions. In addition to that, Dragonfly is 2.9 times more volatile than SGA Solutions CoLtd. It trades about 0.02 of its total potential returns per unit of risk. SGA Solutions CoLtd is currently generating about 0.05 per unit of volatility. If you would invest  49,238  in SGA Solutions CoLtd on October 11, 2024 and sell it today you would earn a total of  2,962  from holding SGA Solutions CoLtd or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.81%
Values	Daily Returns

Dragonfly GF Co  vs.  SGA Solutions CoLtd

Dragonfly GF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dragonfly may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SGA Solutions CoLtd

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Dragonfly and SGA Solutions

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

The idea behind Dragonfly GF Co and SGA Solutions CoLtd 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..