Correlation Between Dana Large and Energy Services

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

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

Diversification Opportunities for Dana Large and Energy Services

0.23

Correlation Coefficient

Dana Large  Energy Services

Modest diversification

The 3 months correlation between Dana and Energy is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap and Energy Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Services and Dana Large 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 Dana Large Cap are associated (or correlated) with Energy Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Services has no effect on the direction of Dana Large i.e., Dana Large and Energy Services go up and down completely randomly.

Pair Corralation between Dana Large and Energy Services

Assuming the 90 days horizon Dana Large Cap is expected to under-perform the Energy Services. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dana Large Cap is 1.01 times less risky than Energy Services. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Energy Services Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  19,273  in Energy Services Fund on October 13, 2024 and sell it today you would lose (1,065) from holding Energy Services Fund or give up 5.53% of portfolio value over 90 days.

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

Dana Large Cap  vs.  Energy Services Fund

Dana Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly 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 fund investors.

Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Services Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Energy Services is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dana Large and Energy Services

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

The idea behind Dana Large Cap and Energy Services Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.