Correlation Between AZZ Incorporated and DLH Holdings

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

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

Diversification Opportunities for AZZ Incorporated and DLH Holdings

-0.37

Correlation Coefficient

AZZ Incorporated  DLH Holdings

Very good diversification

The 3 months correlation between AZZ and DLH is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and DLH Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DLH Holdings Corp and AZZ Incorporated 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 AZZ Incorporated are associated (or correlated) with DLH Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DLH Holdings Corp has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and DLH Holdings go up and down completely randomly.

Pair Corralation between AZZ Incorporated and DLH Holdings

Considering the 90-day investment horizon AZZ Incorporated is expected to generate 0.79 times more return on investment than DLH Holdings. However, AZZ Incorporated is 1.26 times less risky than DLH Holdings. It trades about 0.1 of its potential returns per unit of risk. DLH Holdings Corp is currently generating about -0.02 per unit of risk. If you would invest  3,760  in AZZ Incorporated on September 18, 2024 and sell it today you would earn a total of  5,350  from holding AZZ Incorporated or generate 142.29% return on investment over 90 days.

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

AZZ Incorporated  vs.  DLH Holdings Corp

AZZ Incorporated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AZZ Incorporated and DLH Holdings

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

The idea behind AZZ Incorporated and DLH Holdings Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.