Correlation Between Formetal and Dgb Financial

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

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

Diversification Opportunities for Formetal and Dgb Financial

-0.27

Correlation Coefficient

Formetal  Dgb Financial

Very good diversification

The 3 months correlation between Formetal and Dgb is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Dgb Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dgb Financial and Formetal 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 Formetal Co are associated (or correlated) with Dgb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dgb Financial has no effect on the direction of Formetal i.e., Formetal and Dgb Financial go up and down completely randomly.

Pair Corralation between Formetal and Dgb Financial

Assuming the 90 days trading horizon Formetal Co is expected to under-perform the Dgb Financial. In addition to that, Formetal is 1.56 times more volatile than Dgb Financial. It trades about -0.05 of its total potential returns per unit of risk. Dgb Financial is currently generating about 0.11 per unit of volatility. If you would invest  839,000  in Dgb Financial on August 31, 2024 and sell it today you would earn a total of  56,000  from holding Dgb Financial or generate 6.67% return on investment over 90 days.

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

Formetal Co  vs.  Dgb Financial

Formetal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dgb Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dgb Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dgb Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Formetal and Dgb Financial

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

The idea behind Formetal Co and Dgb Financial 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.