Correlation Between Derichebourg and DBT SA

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

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

Diversification Opportunities for Derichebourg and DBT SA

0.93

Correlation Coefficient

Derichebourg  DBT SA

Almost no diversification

The 3 months correlation between Derichebourg and DBT is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Derichebourg and DBT SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBT SA and Derichebourg 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 Derichebourg are associated (or correlated) with DBT SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBT SA has no effect on the direction of Derichebourg i.e., Derichebourg and DBT SA go up and down completely randomly.

Pair Corralation between Derichebourg and DBT SA

Assuming the 90 days trading horizon Derichebourg is expected to generate 4.65 times less return on investment than DBT SA. But when comparing it to its historical volatility, Derichebourg is 2.48 times less risky than DBT SA. It trades about 0.08 of its potential returns per unit of risk. DBT SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  36.00  in DBT SA on December 29, 2024 and sell it today you would earn a total of  18.00  from holding DBT SA or generate 50.0% return on investment over 90 days.

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

Derichebourg  vs.  DBT SA

Derichebourg

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Derichebourg are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Derichebourg may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DBT SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DBT SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, DBT SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Derichebourg and DBT SA

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

The idea behind Derichebourg and DBT SA 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.