Correlation Between Dentsu and SILVER BULLET

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

By analyzing existing cross correlation between Dentsu Group and SILVER BULLET DATA, you can compare the effects of market volatilities on Dentsu and SILVER BULLET 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 SILVER BULLET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsu and SILVER BULLET.

Diversification Opportunities for Dentsu and SILVER BULLET

-0.68

Correlation Coefficient

Dentsu  SILVER BULLET

Excellent diversification

The 3 months correlation between Dentsu and SILVER is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Dentsu Group and SILVER BULLET DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILVER BULLET DATA 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 SILVER BULLET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILVER BULLET DATA has no effect on the direction of Dentsu i.e., Dentsu and SILVER BULLET go up and down completely randomly.

Pair Corralation between Dentsu and SILVER BULLET

Assuming the 90 days horizon Dentsu Group is expected to generate 2.26 times more return on investment than SILVER BULLET. However, Dentsu is 2.26 times more volatile than SILVER BULLET DATA. It trades about -0.15 of its potential returns per unit of risk. SILVER BULLET DATA is currently generating about -0.43 per unit of risk. If you would invest  2,300  in Dentsu Group on October 25, 2024 and sell it today you would lose (140.00) from holding Dentsu Group or give up 6.09% of portfolio value over 90 days.

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

Dentsu Group  vs.  SILVER BULLET DATA

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SILVER BULLET DATA

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Dentsu and SILVER BULLET

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

The idea behind Dentsu Group and SILVER BULLET DATA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.