Correlation Between Information Technology and Dimension Computer

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

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

Diversification Opportunities for Information Technology and Dimension Computer

0.88

Correlation Coefficient

Information Technology  Dimension Computer

Very poor diversification

The 3 months correlation between Information and Dimension is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Dimension Computer Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimension Computer and Information Technology 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 Information Technology Total are associated (or correlated) with Dimension Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimension Computer has no effect on the direction of Information Technology i.e., Information Technology and Dimension Computer go up and down completely randomly.

Pair Corralation between Information Technology and Dimension Computer

Assuming the 90 days trading horizon Information Technology is expected to generate 4.15 times less return on investment than Dimension Computer. But when comparing it to its historical volatility, Information Technology Total is 1.69 times less risky than Dimension Computer. It trades about 0.07 of its potential returns per unit of risk. Dimension Computer Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,255  in Dimension Computer Technology on December 4, 2024 and sell it today you would earn a total of  1,125  from holding Dimension Computer Technology or generate 49.89% return on investment over 90 days.

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

Information Technology Total  vs.  Dimension Computer Technology

Information Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dimension Computer

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimension Computer Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dimension Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Information Technology and Dimension Computer

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

The idea behind Information Technology Total and Dimension Computer Technology 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.