Correlation Between Archos and DBT SA

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

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

Diversification Opportunities for Archos and DBT SA

0.85

Correlation Coefficient

Archos  DBT SA

Very poor diversification

The 3 months correlation between Archos and DBT is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Archos and DBT SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBT SA and Archos 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 Archos are associated (or correlated) with DBT SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBT SA has no effect on the direction of Archos i.e., Archos and DBT SA go up and down completely randomly.

Pair Corralation between Archos and DBT SA

Assuming the 90 days trading horizon Archos is expected to generate 1.33 times more return on investment than DBT SA. However, Archos is 1.33 times more volatile than DBT SA. It trades about 0.19 of its potential returns per unit of risk. DBT SA is currently generating about 0.15 per unit of risk. If you would invest  11.00  in Archos on December 30, 2024 and sell it today you would earn a total of  11.00  from holding Archos or generate 100.0% return on investment over 90 days.

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

Archos  vs.  DBT SA

Archos

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archos are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Archos reported solid returns over the last few months and may actually be approaching a breakup point.

DBT SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DBT SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, DBT SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archos and DBT SA

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

The idea behind Archos and DBT SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..