Correlation Between DSC Investment and Dragonfly

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

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

Diversification Opportunities for DSC Investment and Dragonfly

0.14

Correlation Coefficient

DSC Investment  Dragonfly

Average diversification

The 3 months correlation between DSC and Dragonfly is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding DSC Investment and Dragonfly GF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dragonfly GF and DSC Investment 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 DSC Investment 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 DSC Investment i.e., DSC Investment and Dragonfly go up and down completely randomly.

Pair Corralation between DSC Investment and Dragonfly

Assuming the 90 days trading horizon DSC Investment is expected to generate 0.58 times more return on investment than Dragonfly. However, DSC Investment is 1.71 times less risky than Dragonfly. It trades about -0.01 of its potential returns per unit of risk. Dragonfly GF Co is currently generating about -0.06 per unit of risk. If you would invest  357,075  in DSC Investment on October 9, 2024 and sell it today you would lose (65,075) from holding DSC Investment or give up 18.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.72%
Values	Daily Returns

DSC Investment  vs.  Dragonfly GF Co

DSC Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DSC Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DSC Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DSC Investment and Dragonfly

The main advantage of trading using opposite DSC Investment and Dragonfly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DSC Investment 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 DSC Investment 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.