Correlation Between Direct Equity and Dear Cashmere

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

By analyzing existing cross correlation between Direct Equity International and Dear Cashmere Holding, you can compare the effects of market volatilities on Direct Equity and Dear Cashmere 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 Direct Equity with a short position of Dear Cashmere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direct Equity and Dear Cashmere.

Diversification Opportunities for Direct Equity and Dear Cashmere

-0.58

Correlation Coefficient

Direct Equity  Dear Cashmere

Excellent diversification

The 3 months correlation between Direct and Dear is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Direct Equity International and Dear Cashmere Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dear Cashmere Holding and Direct Equity 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 Direct Equity International are associated (or correlated) with Dear Cashmere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dear Cashmere Holding has no effect on the direction of Direct Equity i.e., Direct Equity and Dear Cashmere go up and down completely randomly.

Pair Corralation between Direct Equity and Dear Cashmere

Given the investment horizon of 90 days Direct Equity International is expected to generate 2.2 times more return on investment than Dear Cashmere. However, Direct Equity is 2.2 times more volatile than Dear Cashmere Holding. It trades about 0.13 of its potential returns per unit of risk. Dear Cashmere Holding is currently generating about -0.06 per unit of risk. If you would invest  0.01  in Direct Equity International on December 27, 2024 and sell it today you would earn a total of  0.02  from holding Direct Equity International or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Direct Equity International  vs.  Dear Cashmere Holding

Direct Equity Intern

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direct Equity International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Direct Equity demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Dear Cashmere Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dear Cashmere Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Direct Equity and Dear Cashmere

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

The idea behind Direct Equity International and Dear Cashmere Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.