Correlation Between Donnelley Financial and Stonex

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

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

Diversification Opportunities for Donnelley Financial and Stonex

-0.16

Correlation Coefficient

Donnelley Financial  Stonex

Good diversification

The 3 months correlation between Donnelley and Stonex is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Donnelley Financial Solutions and Stonex Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stonex Group and Donnelley Financial 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 Donnelley Financial Solutions are associated (or correlated) with Stonex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stonex Group has no effect on the direction of Donnelley Financial i.e., Donnelley Financial and Stonex go up and down completely randomly.

Pair Corralation between Donnelley Financial and Stonex

Given the investment horizon of 90 days Donnelley Financial Solutions is expected to under-perform the Stonex. In addition to that, Donnelley Financial is 1.71 times more volatile than Stonex Group. It trades about -0.07 of its total potential returns per unit of risk. Stonex Group is currently generating about 0.13 per unit of volatility. If you would invest  10,376  in Stonex Group on November 28, 2024 and sell it today you would earn a total of  1,661  from holding Stonex Group or generate 16.01% return on investment over 90 days.

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

Donnelley Financial Solutions  vs.  Stonex Group

Donnelley Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Donnelley Financial Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Stonex Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stonex Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Stonex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Donnelley Financial and Stonex

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

The idea behind Donnelley Financial Solutions and Stonex Group 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.