Correlation Between Dupont De and SBF 120

Can any of the company-specific risk be diversified away by investing in both Dupont De and SBF 120 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 SBF 120 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 SBF 120, you can compare the effects of market volatilities on Dupont De and SBF 120 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 SBF 120. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and SBF 120.

Diversification Opportunities for Dupont De and SBF 120

0.6

Correlation Coefficient

Dupont De  SBF 120

Poor diversification

The 3 months correlation between Dupont and SBF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and SBF 120 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBF 120 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 SBF 120. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBF 120 has no effect on the direction of Dupont De i.e., Dupont De and SBF 120 go up and down completely randomly.

Pair Corralation between Dupont De and SBF 120

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the SBF 120. In addition to that, Dupont De is 1.88 times more volatile than SBF 120. It trades about -0.01 of its total potential returns per unit of risk. SBF 120 is currently generating about 0.15 per unit of volatility. If you would invest  554,013  in SBF 120 on December 29, 2024 and sell it today you would earn a total of  45,185  from holding SBF 120 or generate 8.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Dupont De Nemours  vs.  SBF 120

Pair Trading with Dupont De and SBF 120

The main advantage of trading using opposite Dupont De and SBF 120 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, SBF 120 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 SBF 120 will offset losses from the drop in SBF 120's long position.

The idea behind Dupont De Nemours and SBF 120 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.