Correlation Between De Licacy and President Chain

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

By analyzing existing cross correlation between De Licacy Industrial and President Chain Store, you can compare the effects of market volatilities on De Licacy and President Chain 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 De Licacy with a short position of President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Licacy and President Chain.

Diversification Opportunities for De Licacy and President Chain

-0.44

Correlation Coefficient

De Licacy  President Chain

Very good diversification

The 3 months correlation between 1464 and President is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and De Licacy 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 De Licacy Industrial are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of De Licacy i.e., De Licacy and President Chain go up and down completely randomly.

Pair Corralation between De Licacy and President Chain

Assuming the 90 days trading horizon De Licacy Industrial is expected to generate 2.35 times more return on investment than President Chain. However, De Licacy is 2.35 times more volatile than President Chain Store. It trades about -0.05 of its potential returns per unit of risk. President Chain Store is currently generating about -0.17 per unit of risk. If you would invest  1,695  in De Licacy Industrial on October 15, 2024 and sell it today you would lose (35.00) from holding De Licacy Industrial or give up 2.06% of portfolio value over 90 days.

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

De Licacy Industrial  vs.  President Chain Store

De Licacy Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, De Licacy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with De Licacy and President Chain

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

The idea behind De Licacy Industrial and President Chain Store 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.