Correlation Between Aptos and DGD

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

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

Diversification Opportunities for Aptos and DGD

0.91

Correlation Coefficient

Aptos  DGD

Almost no diversification

The 3 months correlation between Aptos and DGD is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Aptos and DGD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGD and Aptos 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 Aptos are associated (or correlated) with DGD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGD has no effect on the direction of Aptos i.e., Aptos and DGD go up and down completely randomly.

Pair Corralation between Aptos and DGD

Assuming the 90 days trading horizon Aptos is expected to generate 1.8 times more return on investment than DGD. However, Aptos is 1.8 times more volatile than DGD. It trades about 0.24 of its potential returns per unit of risk. DGD is currently generating about 0.25 per unit of risk. If you would invest  611.00  in Aptos on September 3, 2024 and sell it today you would earn a total of  777.00  from holding Aptos or generate 127.17% return on investment over 90 days.

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

Aptos  vs.  DGD

Aptos

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aptos are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aptos exhibited solid returns over the last few months and may actually be approaching a breakup point.

DGD

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DGD are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, DGD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptos and DGD

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

The idea behind Aptos and DGD 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.