Correlation Between Finebesteel and Dragonfly

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

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

Diversification Opportunities for Finebesteel and Dragonfly

-0.22

Correlation Coefficient

Finebesteel  Dragonfly

Very good diversification

The 3 months correlation between Finebesteel and Dragonfly is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF and Finebesteel 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 Finebesteel are associated (or correlated) with Dragonfly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dragonfly GF has no effect on the direction of Finebesteel i.e., Finebesteel and Dragonfly go up and down completely randomly.

Pair Corralation between Finebesteel and Dragonfly

Assuming the 90 days trading horizon Finebesteel is expected to generate 1.32 times less return on investment than Dragonfly. But when comparing it to its historical volatility, Finebesteel is 2.41 times less risky than Dragonfly. It trades about 0.11 of its potential returns per unit of risk. Dragonfly GF Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  122,000  in Dragonfly GF Co on October 23, 2024 and sell it today you would earn a total of  12,300  from holding Dragonfly GF Co or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.41%
Values	Daily Returns

Finebesteel  vs.  Dragonfly GF Co

Finebesteel

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Dragonfly GF

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 4 (%) 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.

Pair Trading with Finebesteel and Dragonfly

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

The idea behind Finebesteel and Dragonfly GF 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.