Correlation Between DLH Holdings and Perma Fix

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

By analyzing existing cross correlation between DLH Holdings Corp and Perma Fix Environmental Svcs, you can compare the effects of market volatilities on DLH Holdings and Perma Fix 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 DLH Holdings with a short position of Perma Fix. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and Perma Fix.

Diversification Opportunities for DLH Holdings and Perma Fix

0.97

Correlation Coefficient

DLH Holdings  Perma Fix

Almost no diversification

The 3 months correlation between DLH and Perma is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Perma Fix Environmental Svcs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perma Fix Environmental and DLH Holdings 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 DLH Holdings Corp are associated (or correlated) with Perma Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perma Fix Environmental has no effect on the direction of DLH Holdings i.e., DLH Holdings and Perma Fix go up and down completely randomly.

Pair Corralation between DLH Holdings and Perma Fix

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the Perma Fix. In addition to that, DLH Holdings is 1.03 times more volatile than Perma Fix Environmental Svcs. It trades about -0.27 of its total potential returns per unit of risk. Perma Fix Environmental Svcs is currently generating about -0.17 per unit of volatility. If you would invest  1,085  in Perma Fix Environmental Svcs on December 27, 2024 and sell it today you would lose (302.00) from holding Perma Fix Environmental Svcs or give up 27.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

DLH Holdings Corp  vs.  Perma Fix Environmental Svcs

DLH Holdings Corp

Risk-Adjusted Performance

Very Weak

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

Perma Fix Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perma Fix Environmental Svcs 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 fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with DLH Holdings and Perma Fix

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

The idea behind DLH Holdings Corp and Perma Fix Environmental Svcs 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.