Correlation Between Argo Group and DHCNI

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

By analyzing existing cross correlation between Argo Group 65 and DHCNI, you can compare the effects of market volatilities on Argo Group and DHCNI 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 Argo Group with a short position of DHCNI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argo Group and DHCNI.

Diversification Opportunities for Argo Group and DHCNI

0.08

Correlation Coefficient

Argo Group  DHCNI

Significant diversification

The 3 months correlation between Argo and DHCNI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group 65 and DHCNI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHCNI and Argo Group 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 Argo Group 65 are associated (or correlated) with DHCNI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHCNI has no effect on the direction of Argo Group i.e., Argo Group and DHCNI go up and down completely randomly.

Pair Corralation between Argo Group and DHCNI

Given the investment horizon of 90 days Argo Group 65 is expected to generate 0.7 times more return on investment than DHCNI. However, Argo Group 65 is 1.43 times less risky than DHCNI. It trades about 0.01 of its potential returns per unit of risk. DHCNI is currently generating about -0.04 per unit of risk. If you would invest  2,130  in Argo Group 65 on December 27, 2024 and sell it today you would earn a total of  1.00  from holding Argo Group 65 or generate 0.05% return on investment over 90 days.

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

Argo Group 65  vs.  DHCNI

Argo Group 65

Risk-Adjusted Performance

Very Weak

Over the last 90 days Argo Group 65 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Argo Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DHCNI

Risk-Adjusted Performance

Very Weak

Over the last 90 days DHCNI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, DHCNI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Argo Group and DHCNI

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

The idea behind Argo Group 65 and DHCNI 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.