Correlation Between Global Standard and DB Financial

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

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

Diversification Opportunities for Global Standard and DB Financial

0.82

Correlation Coefficient

Global Standard  DB Financial

Very poor diversification

The 3 months correlation between Global and 016610 is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Global Standard Technology and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and Global Standard 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 Global Standard Technology are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of Global Standard i.e., Global Standard and DB Financial go up and down completely randomly.

Pair Corralation between Global Standard and DB Financial

Assuming the 90 days trading horizon Global Standard Technology is expected to generate 3.07 times more return on investment than DB Financial. However, Global Standard is 3.07 times more volatile than DB Financial Investment. It trades about 0.12 of its potential returns per unit of risk. DB Financial Investment is currently generating about 0.15 per unit of risk. If you would invest  1,628,000  in Global Standard Technology on December 25, 2024 and sell it today you would earn a total of  327,000  from holding Global Standard Technology or generate 20.09% return on investment over 90 days.

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

Global Standard Technology  vs.  DB Financial Investment

Global Standard Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Standard Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global Standard sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Global Standard and DB Financial

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

The idea behind Global Standard Technology and DB Financial Investment 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.