Correlation Between Dupont De and Paramount Resources

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

Diversification Opportunities for Dupont De and Paramount Resources

-0.38

Correlation Coefficient

Dupont De  Paramount Resources

Very good diversification

The 3 months correlation between Dupont and Paramount is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources 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 Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Dupont De i.e., Dupont De and Paramount Resources go up and down completely randomly.

Pair Corralation between Dupont De and Paramount Resources

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Paramount Resources. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.89 times less risky than Paramount Resources. The stock trades about -0.08 of its potential returns per unit of risk. The Paramount Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,893  in Paramount Resources on October 26, 2024 and sell it today you would earn a total of  177.00  from holding Paramount Resources or generate 9.35% return on investment over 90 days.

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

Dupont De Nemours  vs.  Paramount Resources

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Paramount Resources

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Paramount Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dupont De and Paramount Resources

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

The idea behind Dupont De Nemours and Paramount Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.