Correlation Between DRGEM and UNISEM

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

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

Diversification Opportunities for DRGEM and UNISEM

0.0

Correlation Coefficient

DRGEM  UNISEM

Pay attention - limited upside

The 3 months correlation between DRGEM and UNISEM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DRGEM and UNISEM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNISEM and DRGEM 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 DRGEM are associated (or correlated) with UNISEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNISEM has no effect on the direction of DRGEM i.e., DRGEM and UNISEM go up and down completely randomly.

Pair Corralation between DRGEM and UNISEM

Assuming the 90 days trading horizon DRGEM is expected to under-perform the UNISEM. But the stock apears to be less risky and, when comparing its historical volatility, DRGEM is 1.46 times less risky than UNISEM. The stock trades about -0.14 of its potential returns per unit of risk. The UNISEM Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  758,466  in UNISEM Co on December 25, 2024 and sell it today you would lose (60,466) from holding UNISEM Co or give up 7.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DRGEM  vs.  UNISEM Co

DRGEM

Risk-Adjusted Performance

Very Weak

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

UNISEM

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UNISEM Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UNISEM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRGEM and UNISEM

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

The idea behind DRGEM and UNISEM 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.