Correlation Between Dupont De and PSB Holdings

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

Diversification Opportunities for Dupont De and PSB Holdings

-0.3

Correlation Coefficient

Dupont De  PSB Holdings

Very good diversification

The 3 months correlation between Dupont and PSB is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings 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 PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Dupont De i.e., Dupont De and PSB Holdings go up and down completely randomly.

Pair Corralation between Dupont De and PSB Holdings

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the PSB Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.01 times less risky than PSB Holdings. The stock trades about -0.39 of its potential returns per unit of risk. The PSB Holdings is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  2,740  in PSB Holdings on October 5, 2024 and sell it today you would lose (90.00) from holding PSB Holdings or give up 3.28% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  PSB Holdings

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 inconsistent 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.

PSB Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSB Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, PSB Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dupont De and PSB Holdings

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

The idea behind Dupont De Nemours and PSB Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.