Correlation Between Europlasma and DNXcorp

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

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

Diversification Opportunities for Europlasma and DNXcorp

0.68

Correlation Coefficient

Europlasma  DNXcorp

Poor diversification

The 3 months correlation between Europlasma and DNXcorp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Europlasma SA and DNXcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNXcorp and Europlasma 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 Europlasma SA are associated (or correlated) with DNXcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNXcorp has no effect on the direction of Europlasma i.e., Europlasma and DNXcorp go up and down completely randomly.

Pair Corralation between Europlasma and DNXcorp

Assuming the 90 days trading horizon Europlasma SA is expected to under-perform the DNXcorp. In addition to that, Europlasma is 10.23 times more volatile than DNXcorp. It trades about -0.02 of its total potential returns per unit of risk. DNXcorp is currently generating about -0.04 per unit of volatility. If you would invest  1,800  in DNXcorp on September 16, 2024 and sell it today you would lose (125.00) from holding DNXcorp or give up 6.94% of portfolio value over 90 days.

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

Europlasma SA  vs.  DNXcorp

Europlasma SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europlasma SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

DNXcorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DNXcorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, DNXcorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Europlasma and DNXcorp

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

The idea behind Europlasma SA and DNXcorp 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.