Correlation Between Dupont De and Bilfinger

Can any of the company-specific risk be diversified away by investing in both Dupont De and Bilfinger 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 Bilfinger 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 Bilfinger SE ADR, you can compare the effects of market volatilities on Dupont De and Bilfinger 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 Bilfinger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Bilfinger.

Diversification Opportunities for Dupont De and Bilfinger

0.06

Correlation Coefficient

Dupont De  Bilfinger

Significant diversification

The 3 months correlation between Dupont and Bilfinger is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Bilfinger SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilfinger SE ADR 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 Bilfinger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilfinger SE ADR has no effect on the direction of Dupont De i.e., Dupont De and Bilfinger go up and down completely randomly.

Pair Corralation between Dupont De and Bilfinger

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Bilfinger. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 2.64 times less risky than Bilfinger. The stock trades about -0.01 of its potential returns per unit of risk. The Bilfinger SE ADR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Bilfinger SE ADR on December 29, 2024 and sell it today you would earn a total of  579.00  from holding Bilfinger SE ADR or generate 61.46% return on investment over 90 days.

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

Dupont De Nemours  vs.  Bilfinger SE ADR

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bilfinger SE ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bilfinger SE ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Bilfinger showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Bilfinger

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

The idea behind Dupont De Nemours and Bilfinger SE ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.