Correlation Between DCM Financial and Investment Trust

Can any of the company-specific risk be diversified away by investing in both DCM Financial and Investment Trust 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 Investment Trust 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 The Investment Trust, you can compare the effects of market volatilities on DCM Financial and Investment Trust 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 Investment Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCM Financial and Investment Trust.

Diversification Opportunities for DCM Financial and Investment Trust

-0.2

Correlation Coefficient

DCM Financial  Investment Trust

Good diversification

The 3 months correlation between DCM and Investment is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding DCM Financial Services and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust 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 Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of DCM Financial i.e., DCM Financial and Investment Trust go up and down completely randomly.

Pair Corralation between DCM Financial and Investment Trust

Assuming the 90 days trading horizon DCM Financial Services is expected to generate 2.89 times more return on investment than Investment Trust. However, DCM Financial is 2.89 times more volatile than The Investment Trust. It trades about 0.14 of its potential returns per unit of risk. The Investment Trust is currently generating about -0.48 per unit of risk. If you would invest  687.00  in DCM Financial Services on October 9, 2024 and sell it today you would earn a total of  52.00  from holding DCM Financial Services or generate 7.57% return on investment over 90 days.

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

DCM Financial Services  vs.  The Investment Trust

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DCM Financial and Investment Trust

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

The idea behind DCM Financial Services and The Investment Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.