Correlation Between Dexon Technology and President Automobile

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

Diversification Opportunities for Dexon Technology and President Automobile

0.34

Correlation Coefficient

Dexon Technology  President Automobile

Weak diversification

The 3 months correlation between Dexon and President is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Dexon Technology PCL and President Automobile Industrie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Automobile 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 President Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Automobile has no effect on the direction of Dexon Technology i.e., Dexon Technology and President Automobile go up and down completely randomly.

Pair Corralation between Dexon Technology and President Automobile

Assuming the 90 days trading horizon Dexon Technology PCL is expected to generate 2.78 times more return on investment than President Automobile. However, Dexon Technology is 2.78 times more volatile than President Automobile Industries. It trades about 0.07 of its potential returns per unit of risk. President Automobile Industries is currently generating about 0.11 per unit of risk. If you would invest  146.00  in Dexon Technology PCL on October 22, 2024 and sell it today you would earn a total of  6.00  from holding Dexon Technology PCL or generate 4.11% return on investment over 90 days.

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

Dexon Technology PCL  vs.  President Automobile Industrie

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 current stock price disturbance, may contribute to short-term losses for the investors.

President Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Automobile Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, President Automobile is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Dexon Technology and President Automobile

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

The idea behind Dexon Technology PCL and President Automobile Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.