Correlation Between Dupont De and RWE Aktiengesellscha

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

Diversification Opportunities for Dupont De and RWE Aktiengesellscha

0.77

Correlation Coefficient

Dupont De  RWE Aktiengesellscha

Poor diversification

The 3 months correlation between Dupont and RWE is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and RWE Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE Aktiengesellschaft 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 RWE Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE Aktiengesellschaft has no effect on the direction of Dupont De i.e., Dupont De and RWE Aktiengesellscha go up and down completely randomly.

Pair Corralation between Dupont De and RWE Aktiengesellscha

Allowing for the 90-day total investment horizon Dupont De is expected to generate 3.92 times less return on investment than RWE Aktiengesellscha. But when comparing it to its historical volatility, Dupont De Nemours is 1.91 times less risky than RWE Aktiengesellscha. It trades about 0.04 of its potential returns per unit of risk. RWE Aktiengesellschaft is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,760  in RWE Aktiengesellschaft on October 23, 2024 and sell it today you would earn a total of  80.00  from holding RWE Aktiengesellschaft or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Dupont De Nemours  vs.  RWE Aktiengesellschaft

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.

RWE Aktiengesellschaft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dupont De and RWE Aktiengesellscha

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

The idea behind Dupont De Nemours and RWE Aktiengesellschaft 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.