Correlation Between Dupont De and VanEck Africa

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

By analyzing existing cross correlation between Dupont De Nemours and VanEck Africa Index, you can compare the effects of market volatilities on Dupont De and VanEck Africa 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 Dupont De with a short position of VanEck Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and VanEck Africa.

Diversification Opportunities for Dupont De and VanEck Africa

0.44

Correlation Coefficient

Dupont De  VanEck Africa

Very weak diversification

The 3 months correlation between Dupont and VanEck is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and VanEck Africa Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Africa Index and Dupont De 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 Dupont De Nemours are associated (or correlated) with VanEck Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Africa Index has no effect on the direction of Dupont De i.e., Dupont De and VanEck Africa go up and down completely randomly.

Pair Corralation between Dupont De and VanEck Africa

Allowing for the 90-day total investment horizon Dupont De is expected to generate 12.27 times less return on investment than VanEck Africa. In addition to that, Dupont De is 1.45 times more volatile than VanEck Africa Index. It trades about 0.01 of its total potential returns per unit of risk. VanEck Africa Index is currently generating about 0.2 per unit of volatility. If you would invest  1,571  in VanEck Africa Index on December 27, 2024 and sell it today you would earn a total of  207.00  from holding VanEck Africa Index or generate 13.18% return on investment over 90 days.

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

Dupont De Nemours  vs.  VanEck Africa Index

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

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

VanEck Africa Index

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Africa Index are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, VanEck Africa disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and VanEck Africa

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

The idea behind Dupont De Nemours and VanEck Africa Index 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.