Correlation Between Allianz Technology and DG Innovate

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

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

Diversification Opportunities for Allianz Technology and DG Innovate

-0.05

Correlation Coefficient

Allianz Technology  DG Innovate

Good diversification

The 3 months correlation between Allianz and DGI is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Allianz Technology Trust and DG Innovate PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DG Innovate PLC and Allianz Technology 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 Allianz Technology Trust are associated (or correlated) with DG Innovate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DG Innovate PLC has no effect on the direction of Allianz Technology i.e., Allianz Technology and DG Innovate go up and down completely randomly.

Pair Corralation between Allianz Technology and DG Innovate

Assuming the 90 days trading horizon Allianz Technology is expected to generate 2.42 times less return on investment than DG Innovate. But when comparing it to its historical volatility, Allianz Technology Trust is 5.22 times less risky than DG Innovate. It trades about 0.29 of its potential returns per unit of risk. DG Innovate PLC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7.10  in DG Innovate PLC on September 5, 2024 and sell it today you would earn a total of  1.40  from holding DG Innovate PLC or generate 19.72% return on investment over 90 days.

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

Allianz Technology Trust  vs.  DG Innovate PLC

Allianz Technology Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Allianz Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

DG Innovate PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Allianz Technology and DG Innovate

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

The idea behind Allianz Technology Trust and DG Innovate 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.