Correlation Between DLH Holdings and Seafarer Exploration

Can any of the company-specific risk be diversified away by investing in both DLH Holdings and Seafarer Exploration 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 Seafarer Exploration 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 Seafarer Exploration, you can compare the effects of market volatilities on DLH Holdings and Seafarer Exploration 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 Seafarer Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and Seafarer Exploration.

Diversification Opportunities for DLH Holdings and Seafarer Exploration

0.46

Correlation Coefficient

DLH Holdings  Seafarer Exploration

Very weak diversification

The 3 months correlation between DLH and Seafarer is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Seafarer Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Exploration 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 Seafarer Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Exploration has no effect on the direction of DLH Holdings i.e., DLH Holdings and Seafarer Exploration go up and down completely randomly.

Pair Corralation between DLH Holdings and Seafarer Exploration

Given the investment horizon of 90 days DLH Holdings Corp is expected to generate 0.56 times more return on investment than Seafarer Exploration. However, DLH Holdings Corp is 1.79 times less risky than Seafarer Exploration. It trades about -0.05 of its potential returns per unit of risk. Seafarer Exploration is currently generating about -0.07 per unit of risk. If you would invest  880.00  in DLH Holdings Corp on October 11, 2024 and sell it today you would lose (94.00) from holding DLH Holdings Corp or give up 10.68% of portfolio value over 90 days.

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

DLH Holdings Corp  vs.  Seafarer Exploration

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Seafarer Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seafarer Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic 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 company investors.

Pair Trading with DLH Holdings and Seafarer Exploration

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

The idea behind DLH Holdings Corp and Seafarer Exploration 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.