Correlation Between Dupont De and Patterson Companies

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

Diversification Opportunities for Dupont De and Patterson Companies

-0.16

Correlation Coefficient

Dupont De  Patterson Companies

Good diversification

The 3 months correlation between Dupont and Patterson is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Dupont De i.e., Dupont De and Patterson Companies go up and down completely randomly.

Pair Corralation between Dupont De and Patterson Companies

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 1.56 times more return on investment than Patterson Companies. However, Dupont De is 1.56 times more volatile than Patterson Companies. It trades about 0.01 of its potential returns per unit of risk. Patterson Companies is currently generating about -0.04 per unit of risk. If you would invest  7,649  in Dupont De Nemours on December 21, 2024 and sell it today you would earn a total of  44.00  from holding Dupont De Nemours or generate 0.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Dupont De Nemours  vs.  Patterson Companies

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Patterson Companies

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dupont De and Patterson Companies

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

The idea behind Dupont De Nemours and Patterson Companies 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.