Correlation Between Dream Industrial and US Financial

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

By analyzing existing cross correlation between Dream Industrial Real and US Financial 15, you can compare the effects of market volatilities on Dream Industrial and US Financial 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 Dream Industrial with a short position of US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Industrial and US Financial.

Diversification Opportunities for Dream Industrial and US Financial

-0.62

Correlation Coefficient

Dream Industrial  US Financial

Excellent diversification

The 3 months correlation between Dream and FTU-PB is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dream Industrial Real and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 and Dream Industrial 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 Dream Industrial Real are associated (or correlated) with US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Dream Industrial i.e., Dream Industrial and US Financial go up and down completely randomly.

Pair Corralation between Dream Industrial and US Financial

Assuming the 90 days trading horizon Dream Industrial Real is expected to under-perform the US Financial. But the stock apears to be less risky and, when comparing its historical volatility, Dream Industrial Real is 1.63 times less risky than US Financial. The stock trades about -0.2 of its potential returns per unit of risk. The US Financial 15 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  707.00  in US Financial 15 on October 6, 2024 and sell it today you would earn a total of  27.00  from holding US Financial 15 or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Dream Industrial Real  vs.  US Financial 15

Dream Industrial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Industrial Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

US Financial 15

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dream Industrial and US Financial

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

The idea behind Dream Industrial Real and US Financial 15 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.