Correlation Between Dana and PLAIDInc

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

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

Diversification Opportunities for Dana and PLAIDInc

0.39

Correlation Coefficient

Dana  PLAIDInc

Weak diversification

The 3 months correlation between Dana and PLAIDInc is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and PLAIDInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAIDInc 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 PLAIDInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAIDInc has no effect on the direction of Dana i.e., Dana and PLAIDInc go up and down completely randomly.

Pair Corralation between Dana and PLAIDInc

Considering the 90-day investment horizon Dana is expected to generate 1.59 times less return on investment than PLAIDInc. But when comparing it to its historical volatility, Dana Inc is 2.36 times less risky than PLAIDInc. It trades about 0.3 of its potential returns per unit of risk. PLAIDInc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  514.00  in PLAIDInc on October 24, 2024 and sell it today you would earn a total of  96.00  from holding PLAIDInc or generate 18.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Dana Inc  vs.  PLAIDInc

Dana Inc

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana displayed solid returns over the last few months and may actually be approaching a breakup point.

PLAIDInc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PLAIDInc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, PLAIDInc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dana and PLAIDInc

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

The idea behind Dana Inc and PLAIDInc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.