Correlation Between DCM Financial and HEG

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

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

Diversification Opportunities for DCM Financial and HEG

0.28

Correlation Coefficient

DCM Financial  HEG

Modest diversification

The 3 months correlation between DCM and HEG is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding DCM Financial Services and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and DCM Financial 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 DCM Financial Services are associated (or correlated) with HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of DCM Financial i.e., DCM Financial and HEG go up and down completely randomly.

Pair Corralation between DCM Financial and HEG

Assuming the 90 days trading horizon DCM Financial is expected to generate 291.55 times less return on investment than HEG. But when comparing it to its historical volatility, DCM Financial Services is 60.59 times less risky than HEG. It trades about 0.04 of its potential returns per unit of risk. HEG Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  17,729  in HEG Limited on September 26, 2024 and sell it today you would earn a total of  35,366  from holding HEG Limited or generate 199.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.06%
Values	Daily Returns

DCM Financial Services  vs.  HEG Limited

DCM Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCM Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, DCM Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

HEG Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, HEG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DCM Financial and HEG

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

The idea behind DCM Financial Services and HEG Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.