Correlation Between DCB Bank and Radiant Cash

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

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

Diversification Opportunities for DCB Bank and Radiant Cash

-0.01

Correlation Coefficient

DCB Bank  Radiant Cash

Good diversification

The 3 months correlation between DCB and Radiant is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding DCB Bank Limited and Radiant Cash Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Cash Management and DCB Bank 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 DCB Bank Limited are associated (or correlated) with Radiant Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Cash Management has no effect on the direction of DCB Bank i.e., DCB Bank and Radiant Cash go up and down completely randomly.

Pair Corralation between DCB Bank and Radiant Cash

Assuming the 90 days trading horizon DCB Bank Limited is expected to generate 1.11 times more return on investment than Radiant Cash. However, DCB Bank is 1.11 times more volatile than Radiant Cash Management. It trades about 0.04 of its potential returns per unit of risk. Radiant Cash Management is currently generating about -0.08 per unit of risk. If you would invest  11,753  in DCB Bank Limited on October 8, 2024 and sell it today you would earn a total of  357.00  from holding DCB Bank Limited or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DCB Bank Limited  vs.  Radiant Cash Management

DCB Bank Limited

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DCB Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, DCB Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Radiant Cash Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radiant Cash Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with DCB Bank and Radiant Cash

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

The idea behind DCB Bank Limited and Radiant Cash Management 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.