Correlation Between DMCC SPECIALITY and EPL

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

By analyzing existing cross correlation between DMCC SPECIALITY CHEMICALS and EPL Limited, you can compare the effects of market volatilities on DMCC SPECIALITY and EPL 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 DMCC SPECIALITY with a short position of EPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMCC SPECIALITY and EPL.

Diversification Opportunities for DMCC SPECIALITY and EPL

0.53

Correlation Coefficient

DMCC SPECIALITY  EPL

Very weak diversification

The 3 months correlation between DMCC and EPL is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding DMCC SPECIALITY CHEMICALS and EPL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EPL Limited and DMCC SPECIALITY 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 DMCC SPECIALITY CHEMICALS are associated (or correlated) with EPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EPL Limited has no effect on the direction of DMCC SPECIALITY i.e., DMCC SPECIALITY and EPL go up and down completely randomly.

Pair Corralation between DMCC SPECIALITY and EPL

Assuming the 90 days trading horizon DMCC SPECIALITY CHEMICALS is expected to generate 1.54 times more return on investment than EPL. However, DMCC SPECIALITY is 1.54 times more volatile than EPL Limited. It trades about 0.23 of its potential returns per unit of risk. EPL Limited is currently generating about 0.1 per unit of risk. If you would invest  30,650  in DMCC SPECIALITY CHEMICALS on September 13, 2024 and sell it today you would earn a total of  6,510  from holding DMCC SPECIALITY CHEMICALS or generate 21.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

DMCC SPECIALITY CHEMICALS  vs.  EPL Limited

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DMCC SPECIALITY CHEMICALS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DMCC SPECIALITY unveiled solid returns over the last few months and may actually be approaching a breakup point.

EPL Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EPL Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EPL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DMCC SPECIALITY and EPL

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

The idea behind DMCC SPECIALITY CHEMICALS and EPL Limited 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.