Correlation Between Delpha Construction and Shining Building

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

By analyzing existing cross correlation between Delpha Construction Co and Shining Building Business, you can compare the effects of market volatilities on Delpha Construction and Shining Building 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 Delpha Construction with a short position of Shining Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delpha Construction and Shining Building.

Diversification Opportunities for Delpha Construction and Shining Building

0.74

Correlation Coefficient

Delpha Construction  Shining Building

Poor diversification

The 3 months correlation between Delpha and Shining is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Delpha Construction Co and Shining Building Business in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shining Building Business and Delpha Construction 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 Delpha Construction Co are associated (or correlated) with Shining Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shining Building Business has no effect on the direction of Delpha Construction i.e., Delpha Construction and Shining Building go up and down completely randomly.

Pair Corralation between Delpha Construction and Shining Building

Assuming the 90 days trading horizon Delpha Construction Co is expected to under-perform the Shining Building. But the stock apears to be less risky and, when comparing its historical volatility, Delpha Construction Co is 1.0 times less risky than Shining Building. The stock trades about -0.05 of its potential returns per unit of risk. The Shining Building Business is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,045  in Shining Building Business on October 24, 2024 and sell it today you would earn a total of  5.00  from holding Shining Building Business or generate 0.48% return on investment over 90 days.

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

Delpha Construction Co  vs.  Shining Building Business

Delpha Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delpha Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Delpha Construction is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Shining Building Business

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shining Building Business are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Shining Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Delpha Construction and Shining Building

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

The idea behind Delpha Construction Co and Shining Building Business 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.