Correlation Between Dynapack International and Advanced Energy

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

By analyzing existing cross correlation between Dynapack International Technology and Advanced Energy Solution, you can compare the effects of market volatilities on Dynapack International and Advanced Energy 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 Dynapack International with a short position of Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynapack International and Advanced Energy.

Diversification Opportunities for Dynapack International and Advanced Energy

0.86

Correlation Coefficient

Dynapack International  Advanced Energy

Very poor diversification

The 3 months correlation between Dynapack and Advanced is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dynapack International Technol and Advanced Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Solution and Dynapack International 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 Dynapack International Technology are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Solution has no effect on the direction of Dynapack International i.e., Dynapack International and Advanced Energy go up and down completely randomly.

Pair Corralation between Dynapack International and Advanced Energy

Assuming the 90 days trading horizon Dynapack International is expected to generate 1.03 times less return on investment than Advanced Energy. In addition to that, Dynapack International is 1.06 times more volatile than Advanced Energy Solution. It trades about 0.29 of its total potential returns per unit of risk. Advanced Energy Solution is currently generating about 0.32 per unit of volatility. If you would invest  48,700  in Advanced Energy Solution on September 14, 2024 and sell it today you would earn a total of  45,900  from holding Advanced Energy Solution or generate 94.25% return on investment over 90 days.

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

Dynapack International Technol  vs.  Advanced Energy Solution

Dynapack International

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynapack International Technology are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dynapack International showed solid returns over the last few months and may actually be approaching a breakup point.

Advanced Energy Solution

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynapack International and Advanced Energy

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

The idea behind Dynapack International Technology and Advanced Energy Solution 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.