Correlation Between Big Bird and Dost Steels

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

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

Diversification Opportunities for Big Bird and Dost Steels

-0.36

Correlation Coefficient

Big Bird  Dost Steels

Very good diversification

The 3 months correlation between Big and Dost is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels and Big Bird 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 Big Bird Foods are associated (or correlated) with Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of Big Bird i.e., Big Bird and Dost Steels go up and down completely randomly.

Pair Corralation between Big Bird and Dost Steels

Assuming the 90 days trading horizon Big Bird Foods is expected to generate 1.36 times more return on investment than Dost Steels. However, Big Bird is 1.36 times more volatile than Dost Steels. It trades about 0.13 of its potential returns per unit of risk. Dost Steels is currently generating about 0.09 per unit of risk. If you would invest  5,627  in Big Bird Foods on October 8, 2024 and sell it today you would earn a total of  579.00  from holding Big Bird Foods or generate 10.29% return on investment over 90 days.

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

Big Bird Foods  vs.  Dost Steels

Big Bird Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Bird Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dost Steels

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dost Steels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Dost Steels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Bird and Dost Steels

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

The idea behind Big Bird Foods and Dost Steels 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.