Correlation Between Dutch Bros and Nissan Chemical

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

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

Diversification Opportunities for Dutch Bros and Nissan Chemical

-0.49

Correlation Coefficient

Dutch Bros  Nissan Chemical

Very good diversification

The 3 months correlation between Dutch and Nissan is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dutch Bros and Nissan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Indu and Dutch Bros 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 Dutch Bros are associated (or correlated) with Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Indu has no effect on the direction of Dutch Bros i.e., Dutch Bros and Nissan Chemical go up and down completely randomly.

Pair Corralation between Dutch Bros and Nissan Chemical

Given the investment horizon of 90 days Dutch Bros is expected to generate 0.37 times more return on investment than Nissan Chemical. However, Dutch Bros is 2.68 times less risky than Nissan Chemical. It trades about -0.06 of its potential returns per unit of risk. Nissan Chemical Industries is currently generating about -0.03 per unit of risk. If you would invest  5,422  in Dutch Bros on October 5, 2024 and sell it today you would lose (184.00) from holding Dutch Bros or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Dutch Bros  vs.  Nissan Chemical Industries

Dutch Bros

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dutch Bros are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Dutch Bros unveiled solid returns over the last few months and may actually be approaching a breakup point.

Nissan Chemical Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Nissan Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dutch Bros and Nissan Chemical

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

The idea behind Dutch Bros and Nissan Chemical Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.