Correlation Between Alpha One and DMY Squared

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

By analyzing existing cross correlation between Alpha One and dMY Squared Technology, you can compare the effects of market volatilities on Alpha One and DMY Squared 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 Alpha One with a short position of DMY Squared. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha One and DMY Squared.

Diversification Opportunities for Alpha One and DMY Squared

-0.08

Correlation Coefficient

Alpha One  DMY Squared

Good diversification

The 3 months correlation between Alpha and DMY is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Alpha One and dMY Squared Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on dMY Squared Technology and Alpha One 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 Alpha One are associated (or correlated) with DMY Squared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of dMY Squared Technology has no effect on the direction of Alpha One i.e., Alpha One and DMY Squared go up and down completely randomly.

Pair Corralation between Alpha One and DMY Squared

If you would invest  1,066  in dMY Squared Technology on December 27, 2024 and sell it today you would earn a total of  54.00  from holding dMY Squared Technology or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Alpha One  vs.  dMY Squared Technology

Alpha One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alpha One is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

dMY Squared Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in dMY Squared Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, DMY Squared is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alpha One and DMY Squared

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

The idea behind Alpha One and dMY Squared 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.