Correlation Between Df Dent and Essex Environmental

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

By analyzing existing cross correlation between Df Dent Midcap and Essex Environmental Opportunities, you can compare the effects of market volatilities on Df Dent and Essex Environmental 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 Df Dent with a short position of Essex Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Df Dent and Essex Environmental.

Diversification Opportunities for Df Dent and Essex Environmental

0.66

Correlation Coefficient

Df Dent  Essex Environmental

Poor diversification

The 3 months correlation between DFMGX and Essex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Df Dent Midcap and Essex Environmental Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Environmental and Df Dent 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 Df Dent Midcap are associated (or correlated) with Essex Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Environmental has no effect on the direction of Df Dent i.e., Df Dent and Essex Environmental go up and down completely randomly.

Pair Corralation between Df Dent and Essex Environmental

Assuming the 90 days horizon Df Dent Midcap is expected to generate 0.76 times more return on investment than Essex Environmental. However, Df Dent Midcap is 1.31 times less risky than Essex Environmental. It trades about 0.07 of its potential returns per unit of risk. Essex Environmental Opportunities is currently generating about 0.01 per unit of risk. If you would invest  2,856  in Df Dent Midcap on September 3, 2024 and sell it today you would earn a total of  1,126  from holding Df Dent Midcap or generate 39.43% return on investment over 90 days.

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

Df Dent Midcap  vs.  Essex Environmental Opportunit

Df Dent Midcap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Df Dent Midcap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Df Dent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Essex Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Environmental Opportunities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Essex Environmental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Df Dent and Essex Environmental

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

The idea behind Df Dent Midcap and Essex Environmental Opportunities 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.