Correlation Between Dividend Growth and Leading Edge

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

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

Diversification Opportunities for Dividend Growth and Leading Edge

-0.57

Correlation Coefficient

Dividend Growth  Leading Edge

Excellent diversification

The 3 months correlation between Dividend and Leading is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Growth Split and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Dividend Growth 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 Dividend Growth Split are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Dividend Growth i.e., Dividend Growth and Leading Edge go up and down completely randomly.

Pair Corralation between Dividend Growth and Leading Edge

Assuming the 90 days trading horizon Dividend Growth Split is expected to generate 0.28 times more return on investment than Leading Edge. However, Dividend Growth Split is 3.52 times less risky than Leading Edge. It trades about 0.05 of its potential returns per unit of risk. Leading Edge Materials is currently generating about 0.01 per unit of risk. If you would invest  484.00  in Dividend Growth Split on September 28, 2024 and sell it today you would earn a total of  208.00  from holding Dividend Growth Split or generate 42.98% return on investment over 90 days.

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

Dividend Growth Split  vs.  Leading Edge Materials

Dividend Growth Split

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Growth Split are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dividend Growth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Dividend Growth and Leading Edge

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

The idea behind Dividend Growth Split and Leading Edge Materials 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.