Correlation Between CVC and DIA

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

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

Diversification Opportunities for CVC and DIA

0.96

Correlation Coefficient

CVC  DIA

Almost no diversification

The 3 months correlation between CVC and DIA is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding CVC and DIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIA and CVC 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 CVC are associated (or correlated) with DIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIA has no effect on the direction of CVC i.e., CVC and DIA go up and down completely randomly.

Pair Corralation between CVC and DIA

Assuming the 90 days trading horizon CVC is expected to under-perform the DIA. But the crypto coin apears to be less risky and, when comparing its historical volatility, CVC is 1.15 times less risky than DIA. The crypto coin trades about -0.23 of its potential returns per unit of risk. The DIA is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  70.00  in DIA on December 28, 2024 and sell it today you would lose (29.00) from holding DIA or give up 41.43% of portfolio value over 90 days.

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

CVC  vs.  DIA

CVC

Risk-Adjusted Performance

Very Weak

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

DIA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CVC and DIA

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

The idea behind CVC and DIA 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.