Correlation Between Dominion Lending and Alignvest Acquisition

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

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

Diversification Opportunities for Dominion Lending and Alignvest Acquisition

0.5

Correlation Coefficient

Dominion Lending  Alignvest Acquisition

Very weak diversification

The 3 months correlation between Dominion and Alignvest is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Lending Centres and Alignvest Acquisition II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alignvest Acquisition and Dominion Lending 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 Dominion Lending Centres are associated (or correlated) with Alignvest Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alignvest Acquisition has no effect on the direction of Dominion Lending i.e., Dominion Lending and Alignvest Acquisition go up and down completely randomly.

Pair Corralation between Dominion Lending and Alignvest Acquisition

Assuming the 90 days trading horizon Dominion Lending Centres is expected to generate 1.95 times more return on investment than Alignvest Acquisition. However, Dominion Lending is 1.95 times more volatile than Alignvest Acquisition II. It trades about 0.07 of its potential returns per unit of risk. Alignvest Acquisition II is currently generating about 0.05 per unit of risk. If you would invest  320.00  in Dominion Lending Centres on October 24, 2024 and sell it today you would earn a total of  525.00  from holding Dominion Lending Centres or generate 164.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Dominion Lending Centres  vs.  Alignvest Acquisition II

Dominion Lending Centres

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Lending Centres are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dominion Lending displayed solid returns over the last few months and may actually be approaching a breakup point.

Alignvest Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alignvest Acquisition II are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Alignvest Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dominion Lending and Alignvest Acquisition

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

The idea behind Dominion Lending Centres and Alignvest Acquisition II 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.