Correlation Between DGB and DENT

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

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

Diversification Opportunities for DGB and DENT

0.96

Correlation Coefficient

DGB  DENT

Almost no diversification

The 3 months correlation between DGB and DENT is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding DGB and DENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENT and DGB 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 DGB are associated (or correlated) with DENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENT has no effect on the direction of DGB i.e., DGB and DENT go up and down completely randomly.

Pair Corralation between DGB and DENT

Assuming the 90 days trading horizon DGB is expected to generate 1.23 times more return on investment than DENT. However, DGB is 1.23 times more volatile than DENT. It trades about -0.01 of its potential returns per unit of risk. DENT is currently generating about -0.06 per unit of risk. If you would invest  1.10  in DGB on November 27, 2024 and sell it today you would lose (0.34) from holding DGB or give up 30.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

DGB  vs.  DENT

DGB

Risk-Adjusted Performance

Very Weak

Over the last 90 days DGB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for DGB shareholders.

DENT

Risk-Adjusted Performance

Very Weak

Over the last 90 days DENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for DENT shareholders.

Pair Trading with DGB and DENT

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

The idea behind DGB and DENT 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.