Correlation Between Action Construction and DMCC SPECIALITY

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

By analyzing existing cross correlation between Action Construction Equipment and DMCC SPECIALITY CHEMICALS, you can compare the effects of market volatilities on Action Construction and DMCC SPECIALITY 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 Action Construction with a short position of DMCC SPECIALITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Action Construction and DMCC SPECIALITY.

Diversification Opportunities for Action Construction and DMCC SPECIALITY

0.71

Correlation Coefficient

Action Construction  DMCC SPECIALITY

Poor diversification

The 3 months correlation between Action and DMCC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Action Construction Equipment and DMCC SPECIALITY CHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCC SPECIALITY CHEMICALS and Action 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 Action Construction Equipment are associated (or correlated) with DMCC SPECIALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCC SPECIALITY CHEMICALS has no effect on the direction of Action Construction i.e., Action Construction and DMCC SPECIALITY go up and down completely randomly.

Pair Corralation between Action Construction and DMCC SPECIALITY

Assuming the 90 days trading horizon Action Construction Equipment is expected to under-perform the DMCC SPECIALITY. But the stock apears to be less risky and, when comparing its historical volatility, Action Construction Equipment is 1.21 times less risky than DMCC SPECIALITY. The stock trades about -0.12 of its potential returns per unit of risk. The DMCC SPECIALITY CHEMICALS is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  32,850  in DMCC SPECIALITY CHEMICALS on December 1, 2024 and sell it today you would lose (3,440) from holding DMCC SPECIALITY CHEMICALS or give up 10.47% of portfolio value over 90 days.

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

Action Construction Equipment  vs.  DMCC SPECIALITY CHEMICALS

Action Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Action Construction Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days DMCC SPECIALITY CHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Action Construction and DMCC SPECIALITY

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

The idea behind Action Construction Equipment and DMCC SPECIALITY CHEMICALS 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.