Correlation Between Dentsu and GREENX METALS

Can any of the company-specific risk be diversified away by investing in both Dentsu and GREENX METALS 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 Dentsu and GREENX METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dentsu Group and GREENX METALS LTD, you can compare the effects of market volatilities on Dentsu and GREENX METALS 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 Dentsu with a short position of GREENX METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsu and GREENX METALS.

Diversification Opportunities for Dentsu and GREENX METALS

0.28

Correlation Coefficient

Dentsu  GREENX METALS

Modest diversification

The 3 months correlation between Dentsu and GREENX is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dentsu Group and GREENX METALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENX METALS LTD and Dentsu 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 Dentsu Group are associated (or correlated) with GREENX METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENX METALS LTD has no effect on the direction of Dentsu i.e., Dentsu and GREENX METALS go up and down completely randomly.

Pair Corralation between Dentsu and GREENX METALS

Assuming the 90 days horizon Dentsu Group is expected to under-perform the GREENX METALS. In addition to that, Dentsu is 5.94 times more volatile than GREENX METALS LTD. It trades about -0.09 of its total potential returns per unit of risk. GREENX METALS LTD is currently generating about -0.01 per unit of volatility. If you would invest  48.00  in GREENX METALS LTD on September 30, 2024 and sell it today you would lose (8.00) from holding GREENX METALS LTD or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dentsu Group  vs.  GREENX METALS LTD

Dentsu Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GREENX METALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GREENX METALS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, GREENX METALS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dentsu and GREENX METALS

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

The idea behind Dentsu Group and GREENX METALS LTD 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.