Correlation Between Value Added and DIO

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

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

Diversification Opportunities for Value Added and DIO

-0.3

Correlation Coefficient

Value Added  DIO

Very good diversification

The 3 months correlation between Value and DIO is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Value Added Technology and DIO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIO Corporation and Value Added 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 Value Added Technology are associated (or correlated) with DIO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIO Corporation has no effect on the direction of Value Added i.e., Value Added and DIO go up and down completely randomly.

Pair Corralation between Value Added and DIO

Assuming the 90 days trading horizon Value Added Technology is expected to generate 1.35 times more return on investment than DIO. However, Value Added is 1.35 times more volatile than DIO Corporation. It trades about 0.12 of its potential returns per unit of risk. DIO Corporation is currently generating about 0.09 per unit of risk. If you would invest  1,888,000  in Value Added Technology on December 30, 2024 and sell it today you would earn a total of  207,000  from holding Value Added Technology or generate 10.96% return on investment over 90 days.

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

Value Added Technology  vs.  DIO Corp.

Value Added Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Added Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Value Added may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DIO Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIO Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DIO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Value Added and DIO

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

The idea behind Value Added Technology and DIO Corporation 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.