Correlation Between Dana and Everus Construction

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

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

Diversification Opportunities for Dana and Everus Construction

0.66

Correlation Coefficient

Dana  Everus Construction

Poor diversification

The 3 months correlation between Dana and Everus is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Everus Construction Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everus Construction and Dana 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 Dana Inc are associated (or correlated) with Everus Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everus Construction has no effect on the direction of Dana i.e., Dana and Everus Construction go up and down completely randomly.

Pair Corralation between Dana and Everus Construction

Considering the 90-day investment horizon Dana Inc is expected to under-perform the Everus Construction. But the stock apears to be less risky and, when comparing its historical volatility, Dana Inc is 1.38 times less risky than Everus Construction. The stock trades about -0.01 of its potential returns per unit of risk. The Everus Construction Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,900  in Everus Construction Group on September 29, 2024 and sell it today you would earn a total of  2,085  from holding Everus Construction Group or generate 42.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	8.67%
Values	Daily Returns

Dana Inc  vs.  Everus Construction Group

Dana Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

Everus Construction

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Everus Construction Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Everus Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dana and Everus Construction

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

The idea behind Dana Inc and Everus Construction Group 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.