Correlation Between Dgb Financial and Incar Financial

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

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

Diversification Opportunities for Dgb Financial and Incar Financial

0.75

Correlation Coefficient

Dgb Financial  Incar Financial

Poor diversification

The 3 months correlation between Dgb and Incar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dgb Financial and Incar Financial Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incar Financial Service and Dgb Financial 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 Dgb Financial are associated (or correlated) with Incar Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incar Financial Service has no effect on the direction of Dgb Financial i.e., Dgb Financial and Incar Financial go up and down completely randomly.

Pair Corralation between Dgb Financial and Incar Financial

Assuming the 90 days trading horizon Dgb Financial is expected to generate 0.77 times more return on investment than Incar Financial. However, Dgb Financial is 1.29 times less risky than Incar Financial. It trades about -0.12 of its potential returns per unit of risk. Incar Financial Service is currently generating about -0.23 per unit of risk. If you would invest  864,000  in Dgb Financial on October 11, 2024 and sell it today you would lose (32,000) from holding Dgb Financial or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Dgb Financial  vs.  Incar Financial Service

Dgb Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dgb Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dgb Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Incar Financial Service

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Dgb Financial and Incar Financial

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

The idea behind Dgb Financial and Incar Financial Service 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.