Correlation Between Dexon Technology and Central Retail

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

By analyzing existing cross correlation between Dexon Technology PCL and Central Retail, you can compare the effects of market volatilities on Dexon Technology and Central Retail 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 Dexon Technology with a short position of Central Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dexon Technology and Central Retail.

Diversification Opportunities for Dexon Technology and Central Retail

-0.6

Correlation Coefficient

Dexon Technology  Central Retail

Excellent diversification

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

Pair Corralation between Dexon Technology and Central Retail

Assuming the 90 days trading horizon Dexon Technology PCL is expected to under-perform the Central Retail. In addition to that, Dexon Technology is 1.47 times more volatile than Central Retail. It trades about -0.03 of its total potential returns per unit of risk. Central Retail is currently generating about 0.09 per unit of volatility. If you would invest  3,125  in Central Retail on October 24, 2024 and sell it today you would earn a total of  300.00  from holding Central Retail or generate 9.6% return on investment over 90 days.

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

Dexon Technology PCL  vs.  Central Retail

Dexon Technology PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dexon Technology PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Dexon Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Central Retail

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Central Retail may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dexon Technology and Central Retail

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

The idea behind Dexon Technology PCL and Central Retail 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .