Correlation Between Incar Financial and Dragonfly

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

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

Diversification Opportunities for Incar Financial and Dragonfly

-0.62

Correlation Coefficient

Incar Financial  Dragonfly

Excellent diversification

The 3 months correlation between Incar and Dragonfly is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Incar Financial Service and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF and Incar 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 Incar Financial Service 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 Incar Financial i.e., Incar Financial and Dragonfly go up and down completely randomly.

Pair Corralation between Incar Financial and Dragonfly

Assuming the 90 days trading horizon Incar Financial Service is expected to under-perform the Dragonfly. But the stock apears to be less risky and, when comparing its historical volatility, Incar Financial Service is 4.01 times less risky than Dragonfly. The stock trades about -0.23 of its potential returns per unit of risk. The Dragonfly GF Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  95,700  in Dragonfly GF Co on October 6, 2024 and sell it today you would earn a total of  33,700  from holding Dragonfly GF Co or generate 35.21% return on investment over 90 days.

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

Incar Financial Service  vs.  Dragonfly GF Co

Incar Financial Service

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Incar Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Dragonfly GF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dragonfly GF Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dragonfly may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Incar Financial and Dragonfly

The main advantage of trading using opposite Incar Financial and Dragonfly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Incar Financial 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 Incar Financial Service 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.