Correlation Between Aston Martin and Dowlais Group

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

By analyzing existing cross correlation between Aston Martin Lagonda and Dowlais Group plc, you can compare the effects of market volatilities on Aston Martin and Dowlais Group 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 Aston Martin with a short position of Dowlais Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aston Martin and Dowlais Group.

Diversification Opportunities for Aston Martin and Dowlais Group

-0.21

Correlation Coefficient

Aston Martin  Dowlais Group

Very good diversification

The 3 months correlation between Aston and Dowlais is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda and Dowlais Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dowlais Group plc and Aston Martin 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 Aston Martin Lagonda are associated (or correlated) with Dowlais Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dowlais Group plc has no effect on the direction of Aston Martin i.e., Aston Martin and Dowlais Group go up and down completely randomly.

Pair Corralation between Aston Martin and Dowlais Group

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the Dowlais Group. In addition to that, Aston Martin is 1.72 times more volatile than Dowlais Group plc. It trades about -0.03 of its total potential returns per unit of risk. Dowlais Group plc is currently generating about 0.23 per unit of volatility. If you would invest  73.00  in Dowlais Group plc on October 8, 2024 and sell it today you would earn a total of  8.00  from holding Dowlais Group plc or generate 10.96% return on investment over 90 days.

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

Aston Martin Lagonda  vs.  Dowlais Group plc

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Aston Martin is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dowlais Group plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dowlais Group plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dowlais Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aston Martin and Dowlais Group

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

The idea behind Aston Martin Lagonda and Dowlais Group plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.