Correlation Between Dentium and DB Financial

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

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

Diversification Opportunities for Dentium and DB Financial

0.24

Correlation Coefficient

Dentium  DB Financial

Modest diversification

The 3 months correlation between Dentium and 016610 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dentium 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 Dentium 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 Dentium 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 Dentium i.e., Dentium and DB Financial go up and down completely randomly.

Pair Corralation between Dentium and DB Financial

Assuming the 90 days trading horizon Dentium is expected to generate 6.46 times less return on investment than DB Financial. In addition to that, Dentium is 2.25 times more volatile than DB Financial Investment. It trades about 0.01 of its total potential returns per unit of risk. DB Financial Investment is currently generating about 0.17 per unit of volatility. If you would invest  534,000  in DB Financial Investment on December 23, 2024 and sell it today you would earn a total of  56,000  from holding DB Financial Investment or generate 10.49% return on investment over 90 days.

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

Dentium  vs.  DB Financial Investment

Dentium

Risk-Adjusted Performance

Very Weak

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

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 13 (%) 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 Dentium and DB Financial

The main advantage of trading using opposite Dentium and DB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dentium 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 Dentium 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.