Correlation Between DIC Holdings and Development Investment

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

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

Diversification Opportunities for DIC Holdings and Development Investment

-0.13

Correlation Coefficient

DIC Holdings  Development Investment

Good diversification

The 3 months correlation between DIC and Development is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding DIC Holdings Construction and Development Investment Constru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Investment and DIC Holdings 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 DIC Holdings Construction are associated (or correlated) with Development Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Investment has no effect on the direction of DIC Holdings i.e., DIC Holdings and Development Investment go up and down completely randomly.

Pair Corralation between DIC Holdings and Development Investment

Assuming the 90 days trading horizon DIC Holdings Construction is expected to generate 1.39 times more return on investment than Development Investment. However, DIC Holdings is 1.39 times more volatile than Development Investment Construction. It trades about 0.01 of its potential returns per unit of risk. Development Investment Construction is currently generating about -0.01 per unit of risk. If you would invest  1,923,001  in DIC Holdings Construction on September 20, 2024 and sell it today you would lose (573,001) from holding DIC Holdings Construction or give up 29.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.69%
Values	Daily Returns

DIC Holdings Construction  vs.  Development Investment Constru

DIC Holdings Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Development Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Development Investment Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Development Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DIC Holdings and Development Investment

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

The idea behind DIC Holdings Construction and Development Investment Construction 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.