Correlation Between Fiberhome Telecommunicatio and DR

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

By analyzing existing cross correlation between Fiberhome Telecommunication Technologies and DR Limited, you can compare the effects of market volatilities on Fiberhome Telecommunicatio and DR 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 Fiberhome Telecommunicatio with a short position of DR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fiberhome Telecommunicatio and DR.

Diversification Opportunities for Fiberhome Telecommunicatio and DR

0.46

Correlation Coefficient

Fiberhome Telecommunicatio  DR

Very weak diversification

The 3 months correlation between Fiberhome and DR is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fiberhome Telecommunication Te and DR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Limited and Fiberhome Telecommunicatio 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 Fiberhome Telecommunication Technologies are associated (or correlated) with DR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Limited has no effect on the direction of Fiberhome Telecommunicatio i.e., Fiberhome Telecommunicatio and DR go up and down completely randomly.

Pair Corralation between Fiberhome Telecommunicatio and DR

Assuming the 90 days trading horizon Fiberhome Telecommunicatio is expected to generate 1.1 times less return on investment than DR. In addition to that, Fiberhome Telecommunicatio is 1.06 times more volatile than DR Limited. It trades about 0.1 of its total potential returns per unit of risk. DR Limited is currently generating about 0.12 per unit of volatility. If you would invest  2,412  in DR Limited on December 24, 2024 and sell it today you would earn a total of  526.00  from holding DR Limited or generate 21.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Fiberhome Telecommunication Te  vs.  DR Limited

Fiberhome Telecommunicatio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fiberhome Telecommunication Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fiberhome Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

DR Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DR sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fiberhome Telecommunicatio and DR

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

The idea behind Fiberhome Telecommunication Technologies and DR Limited 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.