Correlation Between CP ALL and Dexon Technology

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

By analyzing existing cross correlation between CP ALL Public and Dexon Technology PCL, you can compare the effects of market volatilities on CP ALL and Dexon Technology 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 CP ALL with a short position of Dexon Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CP ALL and Dexon Technology.

Diversification Opportunities for CP ALL and Dexon Technology

0.74

Correlation Coefficient

CP ALL  Dexon Technology

Poor diversification

The 3 months correlation between CPALL-R and Dexon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Dexon Technology PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexon Technology PCL and CP ALL 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 CP ALL Public are associated (or correlated) with Dexon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexon Technology PCL has no effect on the direction of CP ALL i.e., CP ALL and Dexon Technology go up and down completely randomly.

Pair Corralation between CP ALL and Dexon Technology

Assuming the 90 days trading horizon CP ALL is expected to generate 112.91 times less return on investment than Dexon Technology. But when comparing it to its historical volatility, CP ALL Public is 45.85 times less risky than Dexon Technology. It trades about 0.02 of its potential returns per unit of risk. Dexon Technology PCL is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Dexon Technology PCL on October 6, 2024 and sell it today you would lose (66.00) from holding Dexon Technology PCL or give up 28.45% of portfolio value over 90 days.

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

CP ALL Public  vs.  Dexon Technology PCL

CP ALL Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CP ALL Public has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Dexon Technology PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dexon Technology PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Dexon Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CP ALL and Dexon Technology

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

The idea behind CP ALL Public and Dexon Technology PCL 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.