Correlation Between Dis Chem and Clicks

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

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

Diversification Opportunities for Dis Chem and Clicks

0.5

Correlation Coefficient

Dis Chem  Clicks

Very weak diversification

The 3 months correlation between Dis and Clicks is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dis Chem Pharmacies and Clicks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clicks and Dis Chem 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 Dis Chem Pharmacies are associated (or correlated) with Clicks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clicks has no effect on the direction of Dis Chem i.e., Dis Chem and Clicks go up and down completely randomly.

Pair Corralation between Dis Chem and Clicks

Assuming the 90 days trading horizon Dis Chem Pharmacies is expected to generate 1.45 times more return on investment than Clicks. However, Dis Chem is 1.45 times more volatile than Clicks. It trades about -0.04 of its potential returns per unit of risk. Clicks is currently generating about -0.18 per unit of risk. If you would invest  369,500  in Dis Chem Pharmacies on September 25, 2024 and sell it today you would lose (5,500) from holding Dis Chem Pharmacies or give up 1.49% of portfolio value over 90 days.

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

Dis Chem Pharmacies  vs.  Clicks

Dis Chem Pharmacies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Clicks

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dis Chem and Clicks

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

The idea behind Dis Chem Pharmacies and Clicks 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.